First, lower unit isn't deep enough. Waterpump is at the bulge and must be submerged to prime - they're not self priming.
Start by removing the small 2-inch long cover on the side of the upper leg. That will reveal the shift disconnect coupling. Remove the BOTTOM bolt from the coupling.
Remove the four small bolts from the underside of the bulge and the one larger bolt at the rear of the motor leg to drop the lower unit.
Set the lower unit skeg in a vice with wood jaw protectors. You can now see the waterpump housing on top of the lower unit housing. Held on by three screws. Remove them (carefully, as they may be corroded in place). Remove the o-ring at the top of the driveshaft (should be in the groove at the top.) Lift the housing off. Impeller may, or may not come off with the housing. Take care not to lose the impeller key - may still be in the driveshaft.
Clean up the base plate and housing of any hard water scale or corrosion. Install new impeller over the driveshaft, taking care to align the drive key/pin. Wet the inside of the pump housing with some Windex, or even plain soapy water. Slide the housing back over the shaft, rotating the driveshaft CLOCKWISE as you push it down over the impeller. Use some Never Seize (or a bit of grease) on the pump housing screws and re-install them.
Install a new o-ring in the top of the driveshaft groove. Generously grease the driveshaft splines. Install the lower unit back onto the mid-section, taking care to align the driveshaft into the crankshaft, and to make sure the water pump tube aligns into the grommet on the pump housing.
Reinstall ONE of the lower unit bolts. Now is the time to install the shift coupling bolt. The groove in the shift rod MUST align in the hole of the shift coupling or you will strip the threads off the bolt. Needle nose pliers and some patience may be required. You only use one bolt on the unit as more than likely you may drop the coupling bolt and you'll need to drop the unit again to get it out.
Once coupling is correctly installed (test shift for forward, neutral and reverse) then install the remaining bolts and the shift coupling cover.
Test in your bucket with the water level ABOVE the bulge where the pump is located...
Good luck!
- Scott