I'm thinking that the answer to whether you walk depends upon the costs for the repair
and whether you can renegotiate the final selling price based upon the results of the survey. Some thoughts:
Cutless bearings all need to be replaced sometime. While it isn't an enjoyable job, it might be one that you can manage yourself depending upon your skill with mechanical stuff.
Bent blade on the prop; how bent? Sometimes you can repair
it. Take it to the prop shop for an evaluation.
Does the rudder have to be removed to replace the shaft? If so, the marina would have to pick up the boat to drop the rudder and you start running into more $$$. If not, replacing the shaft isn't too onerous.
The blisters mean a bottom job with peel and re-epoxy. That can be expensive. The person who posted above asked a good question; are the blisters at or close to the waterline? If so, it might have occurred because the boat might have floated below her lines
and the PO raised the waterline. The side of the hull now wetted may not have been protected by an osmotic barrier. Maybe the "bottom job" can be confined to the strip of hull near the current stripe? Talk with an expert and get some prices / options.
How bad are the leaks in the engine? I assume you are referring to the transmission seal? Cost / necessity of repair
This is a "buyers market" and the seller knows that these problems will impact any possible sales. I would get prices for repairs
and attempt to renegotiate based on what they are. The surveyor had to come up with a value for the boat. How close is the value and the selling price? If the boat is in as good of a shape as you report, these items shouldn't be a deal breaker necessarily.
Morgan made a good, solid boat. The "bones" should be good. Good luck with your decision.