You will also need a seal kit for the lower unit when you take it apart. It is Sierra/NAPA 18-2686, and there is probably an OEM kit available too. Some guys don't like Sierra parts, but I've had no problems with the Sierra Seal Kits. Link below.http://www.iboats.com/mall/partfinder/?cart_id=144929228&gd_grid_id=162&gd_poid=110561&gd_row=29&session_id=009200945
You mentioned in the first post a lot of water in the lower unit. The shift rod o-ring (included in the seal kit) is a common place to leak - to replace it, click on the link below (courtesy of Frank R) for good instructions on how to replace it:
For sealer on the rope seal, I recommend Permatex Ultra Black Gasket Maker. I've had problems with the rope seal "growing" longer with Permatex blue. Buy this at any auto parts store.