I am a USCG License Instructor. To my knowledge, the engine does have to be engaged in order for a sailboat to be considered a power vessel. Just running the engine with out the engine engaged does not constitute a sailboat to be a power vessel.
This was my understanding as well, up until this came up in topic here on the forum. ( which is why this is such a great thread )The actual rule, does not seem to specifically address this issue. Not to sound " Clinton-esque" it seems to come down to how the coast guard or regulatory agency would define " used"
It makes logical sense to me, that if the engine is on, it is immediately
available for use. What clouds the issue it seems, is the defiinition of a powerboat .....one that is being " propelled" by machinery.
In addition, a "vessel underway", is one that is not anchored, or made fast to the shore or aground.
Is a power boat, with it's engine on in neutral ..fishing ..any less a powerboat? no..or any less " underway....no
by definition, it's still underway....and it's still a power vessel
The rules are set up, in part, to give deference/or status to the least maneuverable vessel in a meeting situation (s). Once a sailboat turns its engine on, even though it may not be engaged, can it really, claim less maneuverability over a powerboat? Since the propulsion is immediately available. Not really..imo
Which leads me to believe, that if your engine is on, regardless of whether it's in neutral or not, you should act as if, declare yourself a power vessel and display the shapes and lights of a power vessel.
If a power vessel sees your sails "up" they'll likely treat you as a sailing vessel and give way..if they are normally required to do so....who's going to wait to see if you've got water flow from your engine..before they make a move.....but...as far as the " Rules" go..... I would think you are being mis-leading in your ability to maneuver.
I for one, would like to get a more definitive ruling on this...we seem to have touched upon an area of difference in understandings.