No need to take it all the way down the the glass, unless you actually have stress cracks. Sand it down smooth with 80 grit, fill any bad spots with EverCoat's metal glaze polyester glazing putty (I also like AdTech #17, but it's tough to find sometimes). At this point, if you are going to paint the boat, I would suggest the use of a quality epoxy primer such as PPG's DPLF line, then a quality primer surfacer, then paint as normal. On the "real look flames" you won't be able to do them in gel. I have tried..... You don't have enough time to work once the gel is catalyzed.
On your $2500 budget idea...Only if you do nearly all the labor yourself. Gel-coat materials are less expensive than paint, but gel is much more labor intensive. You might be able to get someone to paint it for you for that price if the boat was stripped and the "body work" was done. Have Fun!