Thanks to all for your input. I pulled the engine to have it rebuilt. A good repair shop estimated the repairs at higher cost then a new comparable 10 HP Volvo MD2010 that they had in stock. So I decided to stick with a similar sized two cylinder engine.
I think it was the right decision as we can cruise at 6 knots without pushing the engine too hard. It does rev high and a larger engine would have less vibration we've heard. But the extra space to service and ridiculously low fuel consumption more then offsets.