I'm a little confused. In your post below you state that you turned the battery charger on and read 13.8V. In another post you stated that you were on a mooring. So I assume you are not connected to shore power. If so, how did the battery charger get power? I don't mean to insult you, but a battery charger takes AC (Shore / 110V / whatever you call it) and converts it to DC power to charge batteries.
You also stated that you can't run the engine. How long have the batteries been sitting without a charge? It's possible that the low battery just needs a charge. However, since the batts are 7 years old, you should probably just replace them.
Regarding the concepts of 'battery banks' you have received a lot of information and can make your own determination on what is best. Personally, I don't see anything wrong with your current setup, as long as you understand it. Clearly, the 'best' set up is a smart controller that ties all batteries together when charging, automatically disconnected when not charging, and provides 'emergency' connection manually. However, you can do all that yourself by just remembering to change the battery switch.
If I were you, considering your description of your needs and how you use the boat, I would buy two new deep cycle batteries. I would buy standard lead acid deep cycle, with the highest AH rating I could find. The batteries would be the same type. Small marine engines (diesel or gas) do NOT need a high amperage starting battery. The typical deep cycle marine battery will provide more than enough current to start the engine. Install them just as you have now. To start the engine, set the battery switch to 1. When the engine is running change the switch to 'both' and leave it there while the engine is running. Both batteries will be charged. When you turn the engine off, change the switch to '2'. Battery '2' is now your 'house bank' and all electrical loads will be supplied by that battery. When it's time to start the engine, just start it (with the switch set to '2'). After the engine starts switch back to 'both' so both batteries get charged. Battery '2' will accept most of the charge while battery 1 just passes the charge off to battery 2. If Battery 2 is too weak to start the engine (perhaps you spend a night or two at anchor or sailed for a VERY long time) then switch to battery 1 and start the engine.
If you remember to change the battery switch yourself, there is no need to modify your electrical system. Just be sure to never change the battery switch to 'off' when the engine is running.
Originally Posted by njadventure
I didn't check voltage at the batteries which I will do the next time. I did turn on the battery charger and the voltage read 13.8 in the both position.
So my first of many questions to come is should I have seen voltage at the starter post in both position 1 & 2. In my limited knowledge, I would think if one battery was dedicated as a starter and the other as a house, there would no voltage in one of the positions. I could be way off in my thinking.