Does the grounding piece that rubs on the shaft ever need to be replaced? Originally it rubbed about a 1/2 -3/4" spot on shaft and now seems to be less.
Yes, it's called a shaft wiper and I've seen them wear and break the mounting bolt off of them. If it's worn down, I'd replace it. The proper term for the part is a "shaft wiper".
Capt J found some from ProMariner Shaft Brushes although I am not sure how the green grounding wire connects to the actual brush. On mine (Cabo) it appears the two green grounding wires are made into the brush. Will try to post a picture.
Ward's marine electric in Fort Lauderdale stocks a lot of the different ones. You might want to email them with the picture as they'll be able to I.D. it probably instantly. Most of the ones I've seen are a bar or chunk of bronze and the bolt that goes through the arm is what the wires attach to. Some of them you have to buy the entire arm, most you can just buy the end......can you take a picture from the side of it?