How does the shaft and bushing look? If worn there will be excess clearance and cause it to leak. I don't see an oring in the diagram, but seems there would have to be something to hold the oil.
The pulley shouldn't rub the housing. Possibly it has run loose in the past and wallowed the bore. Might could take some off the back of the pulley to give it some clearance. You don't want to leave it loose, it will quickly wear the shaft and pulley bore, don't want it binding against the housing, it will overheat.
Looks like there would be room to machine the front of the housing to accept a seal if you have access to a machine shop.
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Today's Featured Article - What Oil Should I Use? - by Francis Robinson. I keep seein this question pop up over and over again in discussion groups all over the web. As with many things there are often several right answers and a few wrong ones. Some purist I'm sure will disagree to no end with what I will tell you but most of us out here in the real world don't really care do we ? Some of them only bring their noses down out of the air long enough to look down them anyway. If you are like me you are only doing this old tractor stuff because you enjoy it. You
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