If you are building from scratch, I recommend a 4 stroke yamaha engine. There was a post wit some OEM units for sale a while ago.
The installation is a lot of work, so might as well start with the best components to make it worthwhile. Just my 2 cents.
Edit - If you can get the merc setup that cheap, then that counts for a lot too! Should be plenty of power, you will get 35MPH.