I have not done the entier transom on my 20 yet, but I will some time eventually. I would say cut directly up from the scupper drains in the floor if you are going to put the piece back in. I may be easier to fair that way. I'm sure others will chime in. I want to raise the boxes to gunnel height like others on the site have. You may want to consider that also.
I repaired my transom in the mid 90's some time way before CSC and I did not cut out the back, or the inside. I went down the middle with a CHAINSAW
that was when I was young and stuipid.
I poured about 1/2 gallon of epoxy in there too. That is going to be a bitch to get out next time around. Plan looks good so far. You have the greatest seacraft restorers at you bekon call here. Keep the pics flowing.