40ELRR Making noise in neutral

I have a 1993 40 hp yamaha (elec. start, remote steering, manual tilt) that is making a grinding & buzzing noise when in neutral. This is particularly bad when the RPMs are increased in neutral (like on initial start). It sounds like either a bearing or gear issue. When the engine is off and in neutral I get a loud clicking sound when I spin the prop by hand as well. I ordered a CD of the manual today and I'm looking for a little insight as to what the issue could be.

It seems to run fine in gear w/o any odd vibes and the water pump only has a handful of hours on it. I'm guessing I either have a bad bearing or the shift linkage is out of spec.

TIA,
Trevor

How doed the lower unit oil look? Metal?

The oil in the lower unit looks fine but it only has about 2 hours on it....

Trevor

[boats.net]

Check the shift linkage to make it is in neutral, may need to be adjusted.