Where are you seeing the oil leaking from?  Can you post a photo?  Are you sure it’s not from gas/oil residue in the exhaust housing running out?  This is normal, especially after just running in a bucket.   Are the surfaces where the seals touch the prop-shaft and driveshaft smooth? or do they have grooves worn in?  You can usually see cracks in the housing halves.  Have you very carefully replaced the rope seal between the housing halves by cutting to the proper length and putting a dab of sealer at each end?

When you changed the impeller, did you get the impeller key positioned where it should be?   Are you running it with the water several inches above the cavitation plate?  If you are just covering the water intake, it will not self prime, and your impeller will usually self-destruct in a minute or two.

Note that most of your 28 HP is based on he 1956 30 HP design and parts.

Dave

more info is needed … as to where the oil shows up.  sometimes  a simple airline crack from freezing  will let oil seep out over time .

has suggested the best is to pump some air in the GC  ..a soapy water  spray can be  used also … testing like a flat  tire will show bubbles where the problem is.

here is  cheap Amazon tool  I  use but you need the  3/8 inch 16TPI  adapter to  screw in the lower oil hole.

you can use it to also  vacum test the GC

https://www.youtube.com/watch?v=B4acSf_BgP4

I’m sure at least some of what you are seeing is exhaust residue.  Each piston stroke that doesn’t fire puts a cylinder-full of oil/gas-vapor mix down the exhaust, and when starting cold with the choke on, it’s a rich mix.  Then, until you get it running smooth, firing each cylinder every time, it continues to put unburned gas/oil mix down the exhaust each time a cylinder doesn’t fire.  Some of this comes out in the water where the oil floats to the surface, where it spreads out and looks like more than it is.  This unburned gas/oil also coats the inside of the exhaust housing and combines with the combustion residue to turn black and some slowly drains out later unless it is given a high throttle run for a while on a boat to clear it out.  Until you have adjusted the high speed carb jet on a boat at wide open throttle, it will not be set right unless you have a test-wheel (which most all of us don’t have)  instead of the prop, so could easily be set too rich.  The bullnose shape of the high speed “needle” is correct.    Before dumping your water barrel, squirt some liquid dish soap on top and you will see the floating oil rapidly turn into a more environmental-friendly goop.  These motors do drink their share of gas at idle speeds, and if the float level is set right, and the carb doesn’t leak gas when the primer-bulb gets firm and is squeezed a bit more, the carb is likely OK.   The pressure test on the gearcase the other guys mentioned is best way to test the gearcase for leaks.

Dave

Probably someone dropped the carb needle on the ground and blunted the point.  You will have to remedy that;  best with another needle.  Using that one can damage the seat inside the carburetor.  You will have a bad day.

The other way that large amounts of fuel can get ingested by a motor   (and end up in the water)  is with a ruptured fuel pump diaphragm.  A symptom of that would be a primer bulb that noes not get hard.