We use the clumping stuff. There are alternatives, but it's really hard to beat the clumping stuff. The boat's a pretty big adjustment for a cat that's not used to it, so I figure it's nice for them to have their regular litter.
I can see where litter in the bilge could be a problem, so we keep an eye on that. Our modified litter box has made it pretty much a non issue, though.
Our cats have their claws too, and we modifed the single support post on our dining table to make a scratching post. Our table lifts off the post, and we wrapped sisal rope around a length of PVC pipe, with a little glue to keep it in place. Then we slid the pipe over the table support. The pipe is just a smidge bigger than the post, so I just shimmed it a little with some cardboard. People see the rope wrapped around the table leg and think we're just being nautical until the see the cats in action.