^^^This^^^
IME you can drive the vehicle thousands of miles with the leak but as Cdan said it can eventually damage the pick-ups.
You can IME get more miles out of it by cleaning out the inside of the distributor (under the cap, and the cap itself ) by using a Solvent designed for electronics ie: CRC Quick Dry Electronics Cleaner. Do
NOT use Carb cleaner or regular Brake cleaner; those contain Toluene and/or Acetone which can damage the shaft and bearing seals and make the leak even worse.
OEM is always the best way to go (I have one in my parts stash) but if money is tight a couple of people have installed aftermarket Distributors. IIRC one person swapped the electronic bits from his original distributor over to the aftermarket distributor when he had a problem with the cheapo distributor??
Or, if you're handy with tools you could try to rebuild the distributor. As CDan said and by-the-book it's not considered rebuildable by Toyota (and Toyota does not sell the seal or bearing as CDan said) but a couple of people have replaced the shaft seal and bearing with aftermarket parts that fit.
So it's doable to replace the bearing and seal, just no way to tell how long it will last IMHO (see link below)
FWIW
After some help from the good folks on the forum, thought I would attempt a replacement of the internal seal and bearing Symptoms: Oil covered Alternator from the top LHS side of engine Oil dripping from the alternator housing Step 1. Remove Distributor Cap and observe if there is copious...
forum.ih8mud.com
Another discussion on aftermarket distributors:
I'm wondering if anyone has used this: Aftermarket Distributor My wife and I both drive 80s. And I have a parts 80. My wife's leaks a lot of oil. A few months ago, I noticed the oil was even on top of the alternator, so .... popped the cap and there was oil. It's dripping down to the...
forum.ih8mud.com
----------------------------------------------------------------------------
Here's a link to RockAuto for aftermarket distributors:
Ignition Parts and More for Your 1997 TOYOTA LAND CRUISER at Reliably Low Prices. Fast Online Catalog. DIY-Easy. Your Choice of Quality. Full Manufacturer Warranty.
www.rockauto.com
Another link with a few options, with one distributor for $80
Buy 1993-1997 Toyota Land Cruiser Ignition Distributor Replacement for a low price of $80.95 at PartsGeek. FREE SHIPPING on most Replacement 905-049 orders.
www.partsgeek.com