I have a '76 170, with a Johnson 88 spl. Based on the floor drains when the boat is at rest, it would seem to float slightly lower (1" ?) than designed. I have 'ping pong ball' valves over the drains, but I doubt the AS folks expected they would be necessary in 1976.
Re: the engine: I would just want to know the actual weight of whatever engine you are considering. Compare that to the weight of what you have now. Personally, I wouldn't want any additional weight back there beyond what I have.
In your case, I am guessing that the added weight of the jack plate, combined with the added distance from the transom, is going to be too much for a 170, especially when two 'bigger' people are back there.
I'm of the opinion that the 'cut down' transom is a safety feature...theoretically, the deepest water could get in my boat while underway is limited by the height of the lowest point of my transom. Add the raised area up forward (about the same height as the 'cut away') and my boat shouldn't be able to hold that much water. A higher transom would change this dramatically and (IMHO), make the boat less safe.
These little boats perform so well, it's easy to forget that they're only 17' long.