Yes job Mitch.
Let's get a few questions out of the way.
Does it have a false floor? Eg. Two bungs or just one.
And can you access the area inside the boat.
The simple test for solid timber is a spike test. Grab a small screw driver and stab it into that "wet" timber. A solid transom will not be able to scrap at the timber. Wet will be a mushy dark deposit left on the screw driver.
If it's only wet from rain. Then your winning.
Remove the affected bung and clear away any old silicon/sika.
Get it bone dry. Tip it up for a few days. Then go nose down while working on it. Use hair dryers or a pedestal fan pointed at for 24hrs etc.
If it has no false floor a bigger bung is a good idea. Stop the small items from blocking the drain.
I would attack the timber with a die grinder to open it up. Because often the bottom of the bung is close to the hull. And you want to open up the area above to make room for bigger bung.
With the opening a snug fit for your bigger bung, and you have access to the area inside the boat, I would create a tapered funnel effect inside. \_/
Then grab some epoxy resin preferably or flowcoat if you only have access that. And paint the exposed timber. Remembering that this might affect the tight fit of your bung in the hole.
Alway use sika flex below the waterline. And your good to go.
Think about the old bolt holes too. An oversized hole and epoxy is a good measure to stop the rot later.
Damo's dodgy boat building factory.