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Official reply from the USCG:
"Usually, a state will not issue a title if the vessel is documented with the Coast Guard. But there are some states that do. I'm assuming you showed them the Certificate of Documentation so they know it's documented. If they told you to show the state registration numbers on the bow of the vessel, that must be associated with the fact that it is titled and not just registered. The decals must be placed as they directed in accordance with their state law. You can always check the state statutes for the registration/titling of a vessel to be sure.
As far as the Coast Guard is concerned the official number of the vessel must be permanently affixed on an interior part of the hull. If you purchased the vessel from someone who already had it documented, the number should already be somewhere in the hull. And it should be affixed so that removal of the number will cause permanent scarring. State registration numbers change with each owner. The official number awarded the vessel by the Coast Guard remains the same for the life of the vessel.
Don't forget the vessel name and hailing port must be marked on the stern of the vessel just as they are listed on your Certificate of Documentation.
It is confusing. But you are dealing with both State laws and Federal regulations by having it both documented and titled."