I would simply use a dremel and a small 3/4" - 1" abraisive cut off wheel. If I remember right, there would be plenty of room to cut it off up in there, it's up in there inside the leg about only a couple of inches I guess, (the cut off point I mean). There's only about 1" of the water tube sticks down below the hole in the casting at the bottom of the leg on a short shaft, (and the rubber grommet butts up to the bottom of the casting when installed) and, easy to get at, from my memory anyway. Maybe someone here has a short shaft motor with the lower unit already off and can measure the short length of the water tube protruding down from the casting inside the leg and can report here on the forum. (pugetsoundboater possibly?) then problem solved. And I am sure you can find an easy way to smooth the burrs left on the edge from cutting that water tube off, (small file, very small diameter round grinding wheel in the dremel, etc).
And I agree with Tubs, I always found them a pain to work on too, but very good motors they are... Very powerful, and great sellers in my area.