Consider Shaft Seal
With regard to the stuffing box seal question, I'd like to suggest a shaft seal as a solution. Back in '91 I installed a PSS shaft seal M/N PSS 01-100-200 Std 1 log 2. Don't know if the entire line is the model number but this is what was written on the invoice. This shaft seal has done an excellent job of helping to keep salt water out of the bildge and out from under the engine (which can help to increase rusting of the engine).Because I don't have the compression adjusted very tight there is occassional water that excapes, especially when motoring under very rough conditions, but this is probably due to vibration of the propeller shaft also.If there is a knocking sound this is probably due to the propeller shaft hitting the hull where it goes through the shaft log. The standard 1-inch bronze shaft is minimal for the 5-ft length. To minimize vibrations consider changing out to a stainless steel shaft which has about 30 percent greater stiffness. At the same time, ensure the new shaft is as true as possible. If the prop ever hits a piece of flotsam it can cause the end of the shaft to become bent which will also cause vibration. Another thing that can be done to reduce vibration is to get the prop balanced.