1/8 of play too much?
Color me hyper conservative but I would not wait until I had 1/8th inch of play before replaceing the cutlass bearing. I certainly did not have 1/8th play in mine and the surveyor as well as the marina yard people agreed that my bearing was shot. I would say there was about 1/16th of side-to-side play on my old bearing. On the new bearing, there was no play at all that I could see.