I've been through this on my boat. This actually is a matter of two related issues. The first is the settling of your mast into the deck. The second is whether the mast compression post block in the bilge is contributing to the problem. The compression block can be checked by driving a small screwdriver into the wood; if it goes in easily, you may have problems with the block. The removal and replacement of the block is very, very work intensive. I did this job myself, but in retrospect I would have paid a few thousand dollars for the yard to do it. You can see many pictures detailing the process I went through at:
http://picasaweb.google.com/rmoretti49/ClickThisPhotoToOpenMastCompressionBlockRepairSpring2008#
You get to see the warts and all. Make sure to click on the photos to enlarge them and read the commentary.
If the block isn't the problem, the mast step needs to be removed. Beneath the fiberglass, the wooden core is probably soaked, rotted, or both, since it has compressed. The repair involves cutting out the soaked core and replacing it with something more solid, then glassing over and replacing he mast step. I have a bit of settling, but I didn't do this repair yet. The yard wants about 2K to do it.
If you have had no change in your rigging tension over the years (that is, you are not bottoming out on your turnbuckles), I don't think I would do the repair. Instead, remove the mast step and reseat it with caulk. The most likely intrusion points for the water are the lag bolt holes and the pipe through which the electrical lines run. Use a flexible caulk around this pipe. Fill in the mast step's top portion cavities with caulk, tapering the caulk to the pipe. Drill a couple of drainage holes into the bottom of your mast. This should keep any new water from getting in through this route. The drainage from your hatch near the mast may simply be the exit point for water that has gotten in through the mast step.