Antony,
There are several things that come to mind as far as the leak:
- There are a lot of double-lipped seals available: if you use one of these, the lip nearest the flywheel must be trimmed off flush to the seal. If the second lip is left in place, the seal will fail in short order. (25/36Hp single-lipped VW Viton seals are available - my personal preference; p/n 111.105.245 from Wolfsburg West)
- A new soft iron gasket must be used upon removal of a torqued gland nut.
- You will not find this in any manual: when you are ready to torque the gland nut for the final assembly, saturate the dowel pins with wicking ('green') Loctite 290.
Good looking motor!!
Hope this helps!
Peter