Time to Replace
If you can wiggle the prop shaft in the bearing, there is too much wear and it is time to replace. It's not that tough a job, but it takes some know how and specialized tools. I had mine done 2 years ago and worked with one of the guys in my boat yard to help me do it. First off, you need a prop puller to remove the prop. Then you have to loosen the nut from the shaft dimple at the transmission to remove the shaft. I took a buffing wheel to the shaft and prop to clean them up real well. To get the bearing out of the strut is the tough part. Sometimes you can drive it out with a hammer and a rod. Often it needs to be cut with a hacksaw and peeled out. The bearing is a thin walled brass bearing, so it is difficult to press out. Once you get the old one out, the rest is easy. Go to West Marine, buy the replacement bearing that is 1-1/4"OD X 1" ID X 4" long, Model 381467 for $55, put it in the freezer to shrink it, and then tap it into place in the strut. Reassemble the shaft and prop and you're ready to go. Also, with the shaft out of that old packing gland, now is the time to repack, or better yet, replace it with a PSS dripless shaft seal. Dry bilge is the way to go!! Good luck.