I have a very similar boat: 1972 Catalina 27 with Evinrude 9.9 mounted through a hole in the transom. Evinrude and Johnson are the same motor.
As you've described, my motor does not really turn; it has no tiller of its own. Control lines are run to the cockpit for throttle, gears, and starting. This is pretty convenient.
: in forward is fine, though a bit delayed like you'd expect. 15 hp would probably solve that.
Response in reverse is pretty bad, but you can learn to compensate. The motor will not tilt-lock in reverse, meaning a sudden burst of power in reverse will lift the motor out of the water (I have actually tilted it up into the halfway-up-locked position just by reversing). Turning to starboard, you need to take it easy, power for a while, then drop to neutral to steer. Turning to port you can keep the motor in gear as prop walk (yes, outboards do it too, especially since they have a longer moment arm) and wash over the rudder will help you; the Catalina 27 loves to spin clockwise in place at precisely the least convenient time.
The response is such that docking and undocking in any kind of cross wind is always a major event, and I'm really not comfortable doing it alone after two years of practice.
: I have never gone over 5 knots with this motor. If you expect to fight a 5-knot current, expect to be waiting the current to go away.
: the motor is basically useless in a real sea; if you hit any weather, forget about getting help from the motor. I could barely bring the bow through the wind in 25-30 knots and and 4-6 foot seas. Do not expect the motor to be useful in "the ocean".
However, I plan to head to the outside of Vancouver Island this summer; I'll let you know how it performs
I have had to replace the starter motor on my Evinrude, a 1990, as well as repair some corrosion (or maybe erosion) in the cooling system. I'm currently getting some grief from the fuel system... probably not too unusual for a motor of that age, but be prepared to do some basic maintenance on such an old motor. Otherwise it's been fairly reliable.
In the end I'd say you're better off with a 15 hp motor, even if it will guzzle more gas. You'll feel much more secure in your ability to maneuver around the marina.
One thing to watch out for is the dimensions of a bigger motor. The Evinrude/Johnson 9.9 and 15 are the same motor, with the latter having a bigger carb and also being somehow retuned for higher RPMs. Otherwise I think it's the same overall size. Not so with other motors that you might replace them with; newer four strokes will be bigger and if your motor is indeed mounted through a transom hole, might not fit, or might fit and not tilt. I had this problem. The Evinrude tilts and has about 1/2" clearance when the after edge of the cowling passes through the hole.
Someday I hope to glass over that godforsaken hole and install a lift bracket. If you're still in the I-don't-have-a-motor-yet stage, I would strongly recommend installing a lift bracket and putting a 15 hp motor on it, either 2 or 4 stroke.
p.s. I feel like $650 is a bit steep for such an old motor.
Hope this helps. Let me know if you want to hear me complain any more about my motor