Ive got a 1982 OMC evinrude 35hp on my aluminum boat that has run like a champ for a year now. the only issue ive had is the seals wearing out fast and letting water in the lower unit. last week I started hearing a knocking sound while in forward gear that would get faster as you increase the throttle. I couldn't tell where exactly it was coming from but it sounded more in the midsection down towards the lower unit. anyways yesterday I went out again. the knocking got louder and louder until the motor started loosing rpms so I throttled down and throttled back up then i heard this god awful crack/breaking sound followed by the sound of something broken loose being tossed around. this was about 3 seconds then I slammed her back in neutral. luckily I was able to idle back to my boathouse. after I pulled her out of the water i drained the lower unit oil i had just replaced and it looked terrible with a side of water. So based on the early symptoms and the final breaking noise does this seem like more of a Lower unit or blown rod problem?

You need a new lower unit.

Sucks, been there done that more times than I want. You may be able to fiND a used one that will just bolt right up.

Based on what you've told us, I would suspect the lower unit is out.

if you found metal shavings in the lower unit oil I would highly suspect the lower unit but if there was no metal in the lower unit oil I would highly suspect the powerhead do a compression test

if you found metal shavings in the lower unit oil I would highly suspect the lower unit but if there was no metal in the lower unit oil I would highly suspect the powerhead do a compression test

Pull the lower unit and start it for a couple of seconds. No knock then it`s the lower.