I replaced the shaft packing on my 2006 LSV last week because at the end of last season, I had the packing nut bottomed out and water was coming out of the shaft seal at a steady stream. I bought TefpackŪ Synthetic Packing, "a strong durable synthetic fiber saturated with teflon" from go2marine.com for $6 for the 2' x 3/16" size.

First I removed the trim panels (two) on the front of the starboard rear locker as this seemed to be the best access. I also removed the ballast intake strainer cup and the large cooling water hose that goes from the v-drive to the impeller. This gave me a little room to work. See pics below.

Next I used an adjustable sink wrench and a pair of channel locks to separate the locking nut from the packing nut, then backed the packing nut all the way out and slid it up the shaft as far as it would go. Then I used a dentist's pick to remove the existing packing. It worked great, I dug 5 pieces of packing out in less than 5 minutes.

I initially followed Brian Raymond's instructions as posted by JesseC (thanks!) but found that the recommended length of 4-1/8" is too short. The pieces I removed were all 4-1/4' so I cut the first piece that length and tested it and it seemed to be the right length. Also, on the advise of my local dealer's mechanic, I cut both ends at a 45 degree angle instead of a straight 90.

I put in three pieces of packing and tigthened and packed the packing per Brian Raymond's instructions but when I tested it on the water, I found that it was leaking a pretty steady stream. Good thing I brought the necessary tools with me so I tightened the packing nut about another couple of turns until the dripping slowed to about once per 30 seconds with the engine in gear at idle speed. I called it good at that point.