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Probably the transponder
I spent two months trying to sort out why a depth sounder from the 1960's was not working properly, and eventually traced it to the LCD display. But everything I learned from that experience would lead me to conclude that if your display is showing a clear and crisp output (of, apparently, 1 foot) that the main unit is actually working properly and it is almost certainly the thru-hull unit that is sending bad data.
From my experience, your best bet would be to pull the thru-hull, get every part number you can off of it, and then enter those long part numbers into a google search. It's amazing what spares can come up at very reasonable prices.
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