Doesn't look good. My "Guess" is that the universal joint struck the inside of the housing and tried to punch a hole through it. May have occurred while the drive was in a very razed position.. as when slowly piloting through very shallow water at idle speed. OR..the engine was started up without first lowering the drive. Everybody does it sooner or later.
A sloppy gimbal bearing may have allowed this to happen combined with a sloppy universal joint. Look for impact marks or dents inside the housing.
Avatar: RELIANCE (1903) The Largest single masted sailing yacht ever built (Until 2004)...with over 16,000 square feet of sail. Successful Americas Cup Defender.
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1986 Minx. SBC 350/260hp, Alpha I. Red, Honey.