Some issues :
It's a very bad idea to test run any engine specially a 2 strokes for long time periods in a barrel with self contained water, can't possibly cooll engine properly with "heated water" along too much oily water going through powerhead which will lessen proper internal heat removal. A friend of mine did same for hours while breaking in a new engine out of the box and to his surprise ended seizing badly his new engine, real bad music.
Sitting a Tohatsu AV plate to be even or 1.5 inch deeper with aft lower keel is no indication whatsoever that engine will work nicely powering any given boat. One issue is a dry installation, other story when combo floats or is under way. Some boats floats way more other way less compared to others, depends on their hull shape.
OTOH, not all boat Companies manufacturers their boat with same transom height which in a S one could vary from 38 to 40 Cm in height. Same applies for engines, Tohatsu builds slight larger lower legs compared to any other engine manufacturer, been able to mesure 3 in same S sizes and all 3 had slight different lower leg mesurements.
Been selling, installing Tohatsu engines, modifying transom heights for the past 10 years, have found that in order to get the max out of any given HP engine need to be spot on transom seated for water flow at speed to skim right under small upper plate same as illustration (1)
If water flow skims right over the small upper plate will achieve unwanted back/over transom water splashes which will slow combo down while lower leg drag will be dramatically increased which is highly counter productive as engine will achieve less rpm and will need to throttle more with associated increased fuel consumption.
If water flow skims above AV plate, the ideal water height level obtained at (1) will bee too much lessened and prop will tend to aerate at choppy, windy water cond and at tclose turns at plane, not necessarily going full throttle. This set up is only good for straight water courses on just flat, calm water cond.
Assume you want to get the max out of that 40 HP, right. The only possible way to know if that Tohatsu seats at the sweet transom heigh spot is by visual inspection. Once on plane with engine trimmed to 90°, have someone pull head out around engine side and check at which lower leg is water passing by and if with water splashing upwards or prop aeration. Water tests must be performed on flat, no windy water cond.
Once correct engine height is matched combo will achieve a very flat middle rear wake at full throttle...
Now it's the proper time to go for a correct prop maximization to a usually a lower pitch prop as Tohatsu likes delivering their engines bit over propped, just good for breaking in their engines, but probably not suited right for your current application and load. See the boat has a dash tach, is it working properly ? does not corresponds to the actual combo ? if so, go for one. Can't make a top prop maximization by ear sound, not even being a musician LOL!!
Just for fun checked both 40-50 HP power head parts. For a correct 50 HP upgrade, provided that other parts are exact same need to swap/buy the following : upper, middle & lower carbs, manifold assy & gasket, reed valve assy, air silencer, 3 spak plugs. Total spare parts cost : $ 730.00 Hand labor, not included. Is it worth the extra expense to achieve + 10 more HP when can have an extraordinary boating fun time with a optimized transom/engine height along a prop maximization...
Happy Boating