And away we go...

[Bushwacker]

I would never go to all the trouble of redoing a transom without at least raising it to 25" because it's so easy to do right now, and you'll be kicking yourself later if you don't! The 20' hull is pretty susceptible for getting swamped by a big wave with the 20" transom . . . there is a reason they went to 25" and full height splashwells on the later models!

And rather than spend $500 on an extension kit for a 1990 vintage motor, you might be better off just putting that $ towards a 25" motor, and with a little luck maybe you could pick up a later model fresh water motor. Both Big Shrimpin and Egg-dog seem to have a lot of knowledge and contacts on Merc's - I'll bet they could help fix you up!