I noticed I was losing small amounts of lower unit oil and found I had had a small hairline crack in the prop shaft housing, the piece down from the knuckle. I got a replacement housing from Prodrive. The prop shaft slides in and out of place in the OLD housing easily, but with the new housing, the prop shaft won't slide in all the way. The shaft is getting hunt up on the lowest bearing, just up from where the lower seal nut screws in. Is it supposed to be REALLY snug to where I need a mallet or hammer to tap in the prop shaft? Not sure why the difference between the two.

Pretty sure its suppose to slide right in. Did you remove the prop seal nut before installing?

Yes, the seal nut is removed. Also, not sure if it matters but I was able to easily remove the bearing from my cracked housing, but I can't get the bearing out of the replacement housing.

The replacement housing they sent me is used, and the bearing looks maybe a little older, doesn't look in bad shape, just the markings on the bearing look older. I'm wondering if the bearing in the replacement housing got jammed in too far and is bent inward?

Something is not right and I wouldn't force it on. Best bet is to call PD on Monday and get a reliable opinion on it.

Removed the bearings from both housings, both bearings fit fine over the prop shaft. I swapped the bearing from my cracked housing into the replacement housing, tapped it in, and the shaft slide in easily. I think the bearing that was in the replacement housing got shoved to far forward over the ridge inside the housing, and it was just too tight for the prop shaft.