A water leak between the block and the bell housing?? That makes no sense. Look closer to see where the leak is coming from. Also, check and or replace all of your water hoses before taking it out. If one of these bust open when your on the water your boat will fill up FAST!!! Only thing I can think of right now is that there is a pinhole leak in one of these hoses and it is spraying water near the area you mentioned...