34' Tolly means the rudder is hung from above with no bottom end support.
The collar with the set screw/bolt is holding the rudder from falling out by riding on the packing nut.
To repack means removing the steering arm, and the collar , at least sliding them upwards, far enough to gain access to the packing nut and be able to remove it from the thread plus enough room to work.
I suspect gaining working room means the steer arm and the collar will have to come off which means if the boat is still in the water it, the rudder, could fall right out.
It's possible there is enough shaft length to arrange a grip for support once the steer arm is off so the collar can be slid up to gain access to the packing nut. If there is room another collar right at the top with an extra setbolt at 180o and some light line to an overhead tie point would be good enough to hold the rudder allowing the support collar to slide up.
A lot depends on how easily all this stuff can be moved.
When replacing all of it I would seriously consider getting a collar of plastic to go between the collar and the packing nut. I suggest 1/4, even 1/8", UHMWPE in black, best , although in the bilge white will be good for many, many years. It is tough, easily worked, slippery, highly wear resistant here and not bothered by being wet. It will virtually stop any wear between the packing nut and the collar. A hole saw and sabre saw will do the cutting and make a spare while you are at it. Even some of the white plastic cutting board sold in cooking dept. would be good. They are not UHMWPE but are a close relative and it should do very well also.
Almost any GOOD packing will work for a rudder as the rate of movement is very slow compared to a prop shaft and it can be tightened more than would be the case for the prop shaft.
Coat the threads of the packing nut, the locknut, the collar and its lockscrew, and the steering arm id with an antiseeze so they don't all freeze together.
When installing the new packing use a tamping tool such a piece of plastic pipe that is ~1/2 the shaft diam or as close as you can make it and work it around pushing the packing into place a bit at a time. A screwdriver will most likely punch through damaging the packing.