See post #22-----When thrust bearing fails the pinion moves up.-----It was not properly meshed-----The pinion gear looks to be scrap to me.----But post some more pictures if you like.----Good luck finding a good used lower unit.
Honestly I'm not intending to argue...I'm most likely poorly informed please forgive me for that.
Driveshaft at the thrust washer from 2 different sides.
Multiple views of the pinion...being a helical bevel gear I understand it gets smaller as the diameter does. And I'm not about to believe I'm gifted enough to see the wear without a good one to compare it too, I'm used to worn out gears looking a good bit more raggedy.
As you correctly surmised the thrust bearing is toast...and both races for the thrust bearing are also no longer serviceable I think because they are no longer mirror smooth.
Again if you read this and think I'm challenging your knowledge please reread it with the understanding that I clearly just don't know and am asking for clarification and hoping the 1st picture of pinion was poorly taken.... yeah I know boat stands for "break out another thousand" but finances are not what they used to be so I'm hoping nothing more.
Most Respectfully
Sean