Garbage disposal problem -- do i need to replace?
... should I be replacing the entire disposal?


You could try removing the disposer and cleaning up the waste elbow outlet, which looks like it may have been permanently damaged by corrosion. As a note, you can remove the disposer without disturbing the sink flange/basket assembly by tapping the large fastening ring counter-clockwise until it releases.

The waste elbow outlet requires a specific type of gasket particular to that brand of disposer, and the connection is held with a special plate and screw. Confirm that you have these, then reassemble and test to ensure it does not leak. Your only alternative is to replace the entire unit.