Sled: Arctic Cat

I bought a new 2007 X-Fire 8 last Fall - leftover sled from 2007 model year.  I ran the sled all last winter and then when I went to drain the drive case, it looked like coffee with creamer coming out; brown!  Obviously, there's water in the oil.  So, I removed the drive case and it looks to me like the driveshaft seal is in backwards. 

Does anyone know the proper orientation for the driveshaft seal?  Is the seal tension spring supposed to face inward towards the innards of the case or outwards towards the driveshaft?  Should I crack the case and inspect for bearing/gear damage?

Since the sled is out of warranty by 2 months, am I screwed for warranty work?  Anyone have this problem??  What's the fix??

HELP!!!

 have lip seals facing inward,keeping oil in case.i would remove torx bolts+3 torx bolts for reverse servo and split case.clean with brake clean.silcone case and re-install torx bolts.wait 24 hours add 12ounces of oil.hope it helps you!