Missing seal function/identification

Pulled the shaft on a 1994 Johnson 50/35 jet to replace/service the water pump impeller. No issues with the work, but after re-installing everything we realized that somehow a seal popped out of the shaft housing. Is it #4 in the following schematic.

https://www.marineengine.com/parts/johnson-evinrude-parts.php?year=1994&hp=50&model=J50BELERE&manufacturer=Johnson&section=Exhaust+Housing+%26amp%3B+Stern+%26amp%3B+Swivel+Bracket

After finally figuring out what it was, my buddy says we don't need it. It looks like it fits dry around the shaft and fits super loose on the shaft itself. He doesn't seem to think it was doing anything anyway, especially how loosely it fit on the shaft. But maybe that means it is worn? He is a mechanical engineer and actually rebuilt this engine wonderfully 2 years ago. So I trust his judgement with the motor. But wanted to double check with the experts on here to see what everyone thought. Looks like we would have to pull the powerhead to replace that seal. Not a big deal if it needs to be replaced. Won't have the boat back out until mid November when duck season opens back up. So we have the time to do what is needed.

Thoughts?

Been doing a lot of research with little results on this. The little I found suggests this particular seal may keep exhaust from going up into the carb bodies/engine. May be way off, but that's all I can come up with. The seal did have a pretty strong exhaust smell to it. Anyone else have a take on this?

Wouldn't worry about it too bad. Like you said about all it does is keep some exhaust smoke from getting into the hood. As loose as they are I doubt they keep much out in the first place. You should be able to split the belly pans an drop the jet pump to reinstall the seal or you can pull the powerhead either way.

Makes sense.

If I run the engine before it's replaced, what concerns are there? Just a little more exhaust in the hood? Any worry with the exhaust smoke getting sucked back into the carbs and causing any performance issues?

Now that I think about you shouldn't even have to worry about smoke getting into your hood since your exhaust is stock. On stock motors the exhaust is separated out so it can only leave out of the exhaust pipe in the jet pump and the relief in the back of the mid. I was thinking about my motor and the exhaust I run on them why I said smoke might get in. Either way you shouldn't have to worry about.

Cool, thanks.