Is it a trailer boat?? ...

It is a 1969 40' fiberglass hull houseboat (no groans now). You are are
probably wondering if I'm crazy and if it's worth it. I paid 4k for the boat
so there is room for some investment (and I use the word loosely).

Remember the stern drive or OB itself is make of aluminium & put
together with stainless bolts & what nots. They are wet whenever the
boat is in the water, even worse the top of the gearbox is blasted with
very hot exhaust driven salt water when the engine is running (they
always corrode from the inside the outside paint etc is just fluff for
the punters:-)), so your 1/4" plates are not such a worry really.

Good point. I'm thinking aluminum because it is so much easier to work with.

Lots of people have stainless cables, chains or even heavy stainless
rod (me:-)) from the top of the transom to the duck board (swim platform).

I had thought of this but not having been around a lot of boats yet, I have
yet to see one supported this way and thought maybe it wasn't a sound way to
support the platform. I would assume you just bolt angle iron or similar to
the transom along the length of the platform to rest it on (bolted of
course)

Either that or I switch to aluminum angle
pieces and stainless bolts. Aluminum should be OK below water line?

Again only if it's a trailer type boat that comes out of the water most
of the year, a few weeks at a time would be OK but full time???, creates
antifoul problems also because you need the aluminium suitable stuff
which doesn't work too well:-)

I notice below some comments about maybe the transom is rotten?? be
careful here because replacing the transom core is just as you suspect a
big job to do yourself or an expensive one to have done for you. If you
have no other symptoms than those you've detailed & just want to tidy up
a bit then new stainless bolts, properly installed is the go.

I didn't pay much for the boat but it is old so of course I don't want to
spend my savings all on the transom.

Hope you don't mind but I've pasted one of my previous howtos on
transom repairs below; just so you can get some better understanding of
what a really big job it is, most older boats have a low value because
the cost of repairing the transom is not worth the money or owner effort.

Your how to is much appreciated Kay(?). I also pick up some West System
manuals. I will now just hope the transom core is just mostly wet.

Thanks again