It is lipped on the 500/550. I just put one on my 500 motor. If it's in place already, let it be, otherwise you're splitting the cases to replace it.
My machinist pointed out my inferior OEM one and advised me to replace it before we did final assembly. Now, my 500 motor is a fire breather so for a stock, gentleman's ride, may not be an issue.
As for Kev's circumstance, I think his seal blew due to the same reason: HiPo goodies under the skin. Brent came along to say that seal isn't lipped, but that's not the same one (his is shift shaft, I was referring to primary shaft behind sprocket).