Moving the transom to 25" is without a doubt a no brainer, it's been covered many times on this forum. Sounds like you are not going with a bracket so you plan with new power is right on. As Rusty said new technology beats the heck out of carbs, lots of oil, smoke etc.
To answer your last question, with the weight distribution improvements mentioned you should be good with a newer engine at 400#. Strictly a personal opinion, whatever brand you choose if a 115 is the same weight as a 140 go with the 140.
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