If bracket is in the water while running on plane and motor is in the water nearly up to the shroud (cowl) theres something foing on beyond the motor mot reaching 5500rpm at WOT.
Unfortunately, waterlogged foam is a sponge and may not weep much water but could still be extremely waterlogged. I'd weigh the setup as it sits now. If you can weigh the boat and trailer, then launch the boat, go back and weigh just the trailer, you can get the boat weight. I can go across my local recycler's scale anytime for free as long as theres no line for the scale. Never had to wait for more then 1 truck in front of me.
Why is the OB on a bracket? I/O conversion?
Is bracket mounted correctly?
A new to you 1987 boat that has had work done (bracket was likely added by an owner and not factory) is always suspect for water intrusion, IMO.
If the motor is so deep that water is nearly upto the cowl, its creating a huge amount of excess drag as is the bracket if its underwater while on plane. Enough to lug the WOT down 700rpm to 4800? I'd guess yes....
A pix of the transom setup would be helpful, showing bracket placement on the hull and outboard/bracket alignment to the keel/bottom of the hull.