For a boat like that, I'd prefer to keep the I/O, also, regardless of cost. It's a pleasure boat, I/O is just better for the application. Our cuddy cabin had a nice big padded engine cover and teak deck across the back. I definitely wouldn't want to give those up for a bit more room and easier maintenance. OB would break all of that up and be noisier.
That sucks about the finish. I'm just surprised it has automotive style base/clear paint instead of gel coat. Is that more common on boats than I think?