Rogue Wave is right, cutting the transom is a bad idea.
But I can see why the OP thinks its a good idea. Its a 22 year old boat (Is it a rib or sib ?), worth a few hundread quid at most and the boat is plated for a much bigger engine than the OP is using. The small engine weight means that taking 3" of height out of the transom wont be an issue and as long as its well sealed it wont cause any delamination problems.
But why bother, a small Jack plate in the USA is only $100, and it will solve the problem in a neat and professional way. It can be removed when you sell the boat and the boats value is maintained.