Loud Squeal Periodically From Driveshaft

[HaulnSS]

Hey guys I got my last run of the Season in this Weekend......
A problem started with the driveshaft somewhere around the packing nut area.
After cruising for a while I started to hear this squealing sound so I slowed down and it went away and I thought ok just an odd noise. So I sped back up and the noise came back again and I knew something was going bad.
At first I couldn't figure out where it was coming from and started freaking out thinking the motor was gonna blow up on me.
I had a friend drive while I lifted the doghouse up and waited for the sound again. It only does it periodically then goes away then comes back again.
It was coming from right around the packing nut area and was making a terrible sound as if you would run the boat on a fake-a-lake and put the boat in gear and it makes that horrible sound because the driveshaft isn't in water.
I can't seem to figure out what is exactly causing this sound.
I really hope it's not something with the transmission; however it never did slip on me and fluid is good.
Another thing is that I need to replace the packing or just tighten the nut up because it has a steady flow of water coming in and the bilge is constantly running and that started a few weeks ago, but I haven't had time to check it out yet. I wonder if this could be part of the culprit?
I was just worried when it started making this sound over the weeknd, but at least it is the end of the season for me and I want to try and get it diagnosed/fixed before storage.
If anyone has an idea what it could be please feel free to point me in the right direction.

Thanks!

I just started my boat for the first time since winterizing in 2011, The boat sat last year. I am getting it ready to sell. I hooked up the fake-a-lake for the first time, after warming up, I put the boat in gear, just to check things out, it made a horrible noise. After reading the post above, is that to be expected, out of the water?

[jmb]

Yes, it will sound horrible. I don't recommend doing that.

[NCSUmoomba]

If you want to run it in gear to check it out, spray it with water while it spins. And don't rev it up too high.