Before I knew the boat had a contract on it, I had contacted Sabre to inquire about what would be the proper way to repair the rotted wood. They asked for pictures and I sent them a few. Here's their response:
In picture #01 I believe that the knee wall is one solid piece that continues down through that shelf into the upper berth back area. In order to achieve the structural integrity you really need to remove that entire piece and replace it with new. The hull sides should be ground to bare glass, and then glass in a new knee wall the entire length. You should use a VE (vinyl-ester) Resin to get a good secondary bond.
I was thinking cutting away the rotted wood and inserting a new piece with dowels or biscuits then tabbing that together by slotting the existing wood and the new wood and "sewing it" with glass tape and resin. Imagine the work involved in having to replace the entire piece?