So today I was down at the boat and really took a look at this little problem. It turns out my shaft log and that whole area is fine and there is NO LEAK!
Turns out the glassed in piece of plywood that the water lift muffler sits on, is not even connected to the solid fiber glass of the boat below and around it. It is just glassed in on the sides and over the top but I can stick a piece of a sail batten all the way through the slow between the fiberglass and the plywood where I original thought it was leaking. The forward and rear edges of the plywood are exposed and the whole piece of wood over time has become water logged between the shaft drip spray, the rudder log and just general wetness in this area. The "spray" leak I saw when the boat was in gear was just the vibration rattling water out of it.
Well as I said, I pried it up with the piece of sail batten and let the whole area get some air under there. Problem solved! No leak what so ever as right under that plywood is solid fiberglass. Also today my rigging got finished and the furler installed and genny bent on! Boat is now 100% ready to go so today was a good day.