I bet that is a factory install on the carriage bolts. I have seen that quite a few times.
The best way to handle this is to, drill out the rotted wood and install a hard wood dowel. It is important to make sure you do not have any black or soft wood remaining after drilling. You will then grind out a divet that is aproximatly 1/2" - 3/4" larger than the dowel hole. This way you can lay two layers of fiber glass cloth to help secure the repair. Now to install the dowels you will want to make up some resin and completely saturate the dowel and install, you should have to tap the dowel in with a hammer. Now the new engine mount bolts need to have a long shoulder that extendes the width of the stringer and the foot of the mount with the stringer washer in place. This way the slight movement of the engine does not cause a sawing action from the threads, causing oval holes. Bergeron Marine has some very nice stringer washers, that come in many different diameters and colors. I use the real large diameter washers on the thin stringer boats or on the high HP applications. After you do the repair it should last two of your life times as the one that we are discusing has lasted probably 25 years already. Remember this is not a race boat, it is a lake/river hot rod.
Here are a few pics of the dowels installed and one of the bilge prior to work.