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OK, well I will asssssume this was an OEM accessory, these engines did not come with the power tilt accessory from the factory. Feel free to post pictures to help clarify. This is a power tilt unit only, not power trim, although you can run the engine partially tilted up at idle speeds for navigating shallow waters.
I would agree, that there is air in the system, most likely due to low fluid level. There is a knurled nut on the side of the reservoir where fluid is added. Fluid level is usually checked when fully tilted up, but sounds like the engine won’t tilt up very far now. So, using dexronII transmission fluid, remove the nut and top off the fluid until it overflows. Now tilt the engine up until it stops, then add more fluid. Repeat this until it will tilt all the way up. Now, just tilt the unit completely up and down a few times to purge any remaining air and check fluid level with the engine tilted all the way up.
Look for external leaks. There is a manual release valve/screw on the front/bottom of the pump, make sure that is screwed all the way in.
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1968 was an OMC Factory Accessory kit. They had a motor/pump made by Calco. Some later models had a Prestolite motor/pump. We had a lot of the Calco pumps fail due to an internal gasket blowing. Evinrude sent us a bunch of Calco pump gasket kits under warranty. I’ve never seen that gasket listed in any parts book.
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