It is how it was made.
As the rudder is buoyant, the washer on the post is to help with upward thrusting and contact with the bottom of the tube and wear at that point.
Re Glass at the post area to fill in those cracks.
The rudder may slope up at the post,or not, toward the transom, so you want to leave this area as is, no build up.
The washer should just fit in this area without much overhang of the washer edges.
You can try it to fit it better.
The rudder packing gland
keeps the water
Repack the gland, silicone grease in the tube, no petroleum grease on rudder tubes.
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SV Cloud Duster