I don't know if 7k gonna get you what you want. Mainly because the upgrade from small block to big block isn't really practicle. Might as well start with the big block or just plan on getting another boat in a couple of years.
Outdrive will depend on horsepower WHen buying used you don't have the luxury of picking and choosing. Hopefully the boat will have the appropriate drive on it already.
You should be able to find a decent late 80's 20 fotter-ish with a 350 for under 10k. But be carefull, these boats are usually basket cases. Take a real good look at the hull and stringers and transom and try to get a water test if you find anything you're interested in.
mirvin