Got the boat running (in driveway) and seemed fine, typical tune up, carb clean, new battery, new plugs etc. was done and everything checked out. Finally got the boat on the water and ran great…cold. Once it warmed up immediate miss/hesitation and I limped it back to the ramp. Got it home, ran it on the hose, and it basically oiled my driveway with the coolant water & oil mixture thru the exhaust. 

Photos to follow, but tear down showed a BURNED head gasket between cyl 2-3, to nothing-non existent missing gasket material and missing 1/8’ firing ring on each cyl…what looks like detonation damage between cylinders 2-3, and a vertical 1’’ crack down cyl 3. Head is also cracked at the mating surface between cylinders 2-3 with same detonation damage…Past the point of machining (obviously). SO, I end up getting a junkyard 351w long block from a ‘97 f250. Start the cleanup & swap over process and the cylinders still have nice cross hatching, stock bore etc..get the desired gt40p heads, and plan to upgrade the intake, which leads me to my question:

Am I crazy/an idiot to not touch this junkyard bottom end or eBay gt40 heads, assemble and just send this thing ? What I mean is NOT having any machine work done to either the heads or block, assemble as-is, and hope for the best. I feel like I know the answer to my question, but that drastically changes this “budget” boat I got myself into. For reference this boat will probably always be a 50 YD beauty, and I’m really on the fence on spending the $$ on a dialed engine. Has anyone not gone the top dog rebuild route and had any success ?

If not, looking for a good machine shop in Mass/NH area. 

I have an engine that was built about the same as you described that just won't die.

Just assemble it carefully, use the original boat oil pan and oil pump pickup and dipstick and transfer your marine parts to the new engine

The timing cover is specific to your boat engine so you definitely want to reuse that

Maybe put in a new rear main seal. It's a 1 piece and in your case a rear main seal for a 97 F250 will work fine

You might want to put brass freeze plugs in the block and the heads, otherwise maybe 10 or 12 years down the road, one may rust out 

Bad winterization makes me wonder about the condition of your exhaust manifolds, since they can leak water into the engine or leak externally.

Could you spend a lot more on the engine? Sure but you have a budget in mind and a plan in your head so I say ..................Go for it