Hi Jim -
thanks for the info.
I did look at that compression "block" in the bilge, and it did look soft. it looks like the epoxy that covered it had cracked away, allowing bilge water to soak the wood.
If anyone has any more info on how to fix this - please let me know.
I still think the boat was a decent price - $2,000. The sails looked brand new, the interior was in good condition, and I couldn't see any water marks on the inside of the boat. And its a diesel.