My GTR 37 has the aluminum casting lower unit. I noticed today that the prop and shaft was sticking out the foot 1/2" further than what it should be. I took the lower unit off and the pulley is locked in place and the nylock nut is tight on the end. I assuming the belt pulley slipped. Would anyone know the measurement of where the pulley should be set or is it bottom out against the flange?

Your front bearing is toast. Check it first.

The front pulley locates the shaft. Shaft slides all the way up to the bearing step machines in shaft, and the pulley clamps on the shaft to lock it all down.

I found the issue. THe snap ring that hold the bearing in place was missing. This was allowing the bearing to slide and half inch and make contact with the rubber seal.