Re: Need one more person to talk me out of buying a OMC I/O! ;~)
Let me tell ya my deal since I jsut ended up in your situation
I bought a 175 ski from the mother-inlaw fo 1k. I knew the block was blown, and I'm mechanicly adept. The only reason I bought the boat was because it's pretty much new and needs no restore, excepetion--engine. Definition of "new": No interior work needed, came with tralor, no rust bearings and seals good, I could throw this boat in the water and move arround with oars in confidence.
Engine repairs: Pull that crap and make it new. Finding the block was a chore, HOWEVER you can try and do a mercruiser conversion to it. If your looking at an outboard conversion good luck, It's a pontoon so it probably won't be as bad as sealing up a ski transom. (But I don't know) The 3.0L is everywhere but people want more for them than the V6. Look arround before you buy and see if you cna find a shippable dependable doner first. So far I've spend 1200 on the engine. KEEP IN MIND, that the new block is a .04 bore with a head job. I'm pretty much going to 0 hours. HOWEVER once I drop the engine in I won't have sealing issues like you're looking at.
So 2.2k so far and I don't have it in the water, but I'm not far. How much more work do you have than me, and I'm donig the work myself. Getting a shop that will work on the OMC will be difficult if not impossible; a machine shop for a block rebuild that I'm working on myself is not the same thing.
Biggest point I have is that I'm $500 away and I can still sell and break even if I wanted. What's the local desire for a pontoon, with an unservicable engine, rust, and other unknown issues going to resell for? I say stay below your re-sell value with repairs and your ok. Go over that and you will want to stick your head in the prop.
Best of luck to you!