@crankcall
I have been to Klaus Marine two times within three days now. I did get some free advice on what to do with my issue.
So far, according to the gentleman at the counter (guessing he is the owner, didn't catch his name) the behavior I am describing is perfectly normal.
The way it was described to me is "if you smoked for 30 years, and only coughed than for the first time, all the exhaust buildup would come out". That is whats happening with my motor/propeller.
He did sell me $70 worth of stuff that I do or maybe don't need. (gear oil I need, the rest is pump, screws/caps etc) Wasn't expecting this but I'll take it and support the local shop, especially when "free" advise was given. Although he seem swamped, he did take some time to explain things to me and was nice about it.
Now if my experiment does not work out, a reseal job on this motor is about $495 including $88 for seal kit and ~$70 for water pump. (water pump I may not need)
He actually does not have the kit in stock as they are on back order till sept/oct but can make up the kits from individual parts. I am really hoping I do not need to go this reseal route as that would cost me half of what I paid for my entire boat/motor/trailer.
As for the year.
Based on the info provided to Klaus (motor cover decals, 11 tooth starter gear) this should be between and 1986-88. It is a 100:1 ratio.
I did get come Lucas 2 stroke oil from Crappy Tire.
Thanks for the heads up on the premium gas, I was just going to fill the tank with regular.
I will try to fill the gearbox with the purchased oil today and run it for at least an hour in gear at low speed. Recheck for milky oil and keep my fingers crossed that all is good.