Final update.
Glad to report the issue is gone. As suggested by most of you, the problem was a mix of a lean condition and too advanced timing. The timing was set to the older model's spec, 6 degrees (that explains why it blew the gasket last summer). I delayed it to 1 degree following the manual and improved lots. Then I adjusted the fuel mixture; the needle was about half turned towards the lean side.
I finally got the engine idle/fwd at ~700 RPMs in the water. The shift now engages softly....you can barely hear the gear apply, particularly in reverse.
Went out to the lake with the four-blade prop. While it was only me, a full fuel tank and a heavy toolbox, I could tell right away it would perform better when loaded.
The engine runs smoother, quieter, has more responsive throttle and has more power. It comes out the hole shot faster and reaches speeds (way over 40mph, at 4k revs) I'd never seen in this boat since I bought it. It had plenty of power left to go even faster, but the lake was choppy (~2-feet waves).
Good thing I don't need to rebuild the carb and I can use the new prop without blowing the gasket again.
Thanks, everyone, for your input. This forum rocks.
