The spacer test made it so the lip seal was not touching anything and therefore could not generate heat, but all the bearings in the unit were still preloaded and as normal. In that case, nothing got hot. So the lip seal is generating the heat. Plus, the output shaft right next to the seal gets...
I have a tool that attaches to a CNC mill called a "right angle head".
Its just a 90 degree adapter so you can point the tool sideways.
Made internally just how you'd think..taper bearings on input shaft, angular bearings on output shaft.
And a rubber lip seal on the end of the output shaft...