It is likely the seals, but I hope the real CP experts will chime in. Is there any other damage (hair-line crack) to the lower unit?.... Some Yamahas, like my 300 HP can get 'milky' oil because of less-than-desirable engineering on Yamahas' part. (The Yamaha manual says 10% water in the lower unit oil is OK.... yes, it really says that!). But you don't see that seeping out of the lower unit like this; you see it in the oil when you change the lower-unit lube/oil. Oil is lighter than water and will 'float' to top of the housing, above the water, which is why the 'milky' water will seep out the bottom first. Depending on what you hit; how hard you hit, will determine if it is serious issue. It may not be serious damage. May need seals? Believe me I am no outboard expert; My past 35 years were with diesels inboards, so I hope some CP experts will correct anything wrong I might be saying here .How/why does it Mix with water? Damage to lower unit from banging prop?
Yes, vibration afterwards. Didn’t hit prop while going fast. No gears grinding noticed but I limped boat back to slip slowly as possible. Probably took a good 45min getting back afterwards.After you hit what you hit ,did you notice vibration? loud noise from the lower unit? gears grinding? After you hit, how far, how long, how fast did you run the boat?
I’ll hopefully have it looked at next week and will post updateThe prop shaft maybe bent and needs to be checked . Lu needs pressure checked for bad seals. Might replaced are seals, other parts and full water pump. If me, I would find a good LU shop and have it fully inspected.
Looking at more than 1g more than likely, and like you said thats if you do it yourself. And you better be familiar with shimming everything.I second above opinion. If you not in position to get a new go with aftermarket. Fixing old makes 0 sense. You have old gears exposed to salt water and work without proper lubrication. you will be close to 1 g in parts and labor will be high unless you will do it yourself.