Does the boat have a carb or is it EFI? I believe in 04 EFI was still an option. Limp mode is only on the EFI boat. If the temp went high, the boat alarm should have sounded to alert you to the condition. If it did not go off, then the alarm doesn't work, the gauge isn't accurate, or something of that nature.
There are several causes for overheating, impeller (most common), engine water pump, clog in the intake line somewhere, thermostat. Overheating could have caused no damage or a lot of damage. Any chance you checked the oil after the run? Milky oil would indicate head damage. Heads, decks, head gasket, exhaust all could be effected by an overheat. I would definately ask to see cylinder pressures and a leak down test results from a shop. Then they still have to find the cause of the problem if those check.

If this was my first experience with that boat, I would continue looking for another. In this economy, you will find something in great shape, running properly for a good deal. Parts are plentiful for SB Chevy, but unless you do the work yourself you are looking at $60-90/hr labor for repairs.