Re: Could 27 hp fit here?
The engine pictured is on what appear to be aluminum motor mounting plates. These could easily have been drilled more aft or forward. I think that it was likely that the PO did not want to remove and replace the prop shaft, or have the current one shortened to fit a larger engine.
My guess is that the larger engine wouldn't fit his budget...
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USCG Licensed OUPV Captain, ASA 101/103/104/105 Certified Instructor - Also certified in Recreational Marine Electrical Systems