wrote
I will need to buy a service manual in order to
figure out the right shift rod position is supposed to be.

If you said what type drive you have, I overlooked it.

If it's the same as mine, this should help:
http://www.mercstuff.com/waterpumpinst.htm

The illustrations are right out of the Merc service manual.

Prior to reinstalling, the shift lever in the boat is in full forward and
the shift shaft on the LU is rotated full clockwise. An appropriately sized
12 point socket on a nut driver handle makes a good tool for rotating the
shift shaft. The shifter has to be held in position by holding a little
pressure on the prop shaft in the reverse direction, which is best done by a
helper. The LU should go in far enough to start the nuts on the studs before
you meet any serious resistance. The last half inch or so can be tight, but
you should be able to wiggle it into place by hand. You can draw it together
by tightening the nuts, but if you do it that way and it doesn't draw
together smoothly and easily, something's wrong and you need to back off and
start over.