PG20 and PG22 for tiller outboard

[pee wee]

It sounds like you'd be okay structurally to do what you want, you will be reducing the protection from being swamped by a wave over the transom, though. In essence you're lowering the seating in the rear of the boat, I believe.

[jacquesmm]

Get the longest shaft you can that way your transom will not be too low and you will not have to cut (or not much) the motorwell bulkhead.

For the boat to run efficiently, you will need weights forward.

Many years ago, I routinely ran sucvh a boat with a 50HP and tiller but I was strong and prudent.
In the US, such a set up would have a capacity tag that shows max. 25 HP (my guess).

[OneWayTraffic]

I would consider moving the rear bulkhead backwards a bit. Then a half height bench to sit on. Drain out the sides or transom through pvc pipe. If you have sealed the bench off it could act as flotation back there.