I started preparing the boat for the new transom by grinding away the fiberglass lip that was left when the old wood came out and any remaining wood from where the old transom was stuck to the boat. New resin won't stick well to wood, so you want a roughed-up but even surface all around, and you don't want problems when sliding the new transom into place. Grinding fiberglass is insanely messy. Wear a very good filter mask, goggles and earplugs, and have an air compressor ready to blow yourself clean when you're done.
Don't go to bed without taking a shower. Ask me how I know this.
Along the way, you might look like this, except you won't be me, and might have more hair:
By the way, if you yell "hey come take a picture of me" and your wife agrees, she will decline once she opens the door to the garage, swear at you for the stinky mess you're making, tell you to stop making so much noise, give you a crabby face and close the door. Then you'll have to use your cell phone to get the job done yourself.
I finished the grinding by making sure I had at least 6-8 inches of ground-down fiberglass surface all around the transom area. I made sure all the wood was removed, and I smoothed any surface the transom was going to contact. Try to move quickly with the grinder. Fiberglass heats up quickly and it's easy to get carried away and grind through something important. Also, by "grind" I mean grind. Don't use anything but 36 grit paper on a sander or a sanding wheel on a 4.5" grinder (or equivalent). Anything less will have a tendency to "shine" the surface, making all your work pointless as the new epoxy-resin won't stick very well.
Once the grinding was done and I vacuumed the interior, I went to Sears and asked them for an appliance box and used a huge section of cardboard from the box to make a template. Take time cutting the template to minimize sanding or re-cutting your new transom wood. The results are shown below. This was a rewarding part of the process as I could finally visualize the new transom in place.
On to the next step: Installing the New Transom