Jim,
I use to own a Passport 40 with a Pathfinder engine. A couple of years ago I thought about doing a repower but experienced sticker shock and decided to rebuild most of the external components instead. The quotes I received ranged from $18k to $20k with me doing a lot of the work. I planned to have the mechanic just remove the old engine and install/align the new engine. I was going to disconnect the old engine and do all the connections to the new engine.
The Pathfinder/VW engine is shorter than the other engines so you will need to haul the boat out and have the prop shaft shortened. I looked at a number of different engines and I would have gone with a Beta Marine engine, it requires a 2" exhaust and at the time did not have any electronics. The newer Yanmars have electronics and require a 3" exhaust.
You may want to look at getting a used head instead of rebuilding the old. VW made several million of those engines so there should be some good engines around.
Tim
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