Actually I have spent much of my working life converting workboats to adventure yachts, many of them far bigger than this! IMHO Fiona could make a fine basis for a yacht at a budget price if her hull and machinery are sound.
Not RN, I don't think! From the photographs and the other posts, she looks like an ex-RMAS harbour tug, common to quite a few of the old Naval Dockyards...?
No. Most of those I project managed were larger, the most interesting being 2 Amel built 60 metre ex Dutch navy pilot vessels. These little tugs are super boats though.
Not impractical. But certainly more complex than needed. Having been involved with minehunters I would say the VS drive is nothing to be afraid of. For this price though you could afford to rip it out and fit a conventional prop, but you would need a rudder too! Personally I would leave it alone if in good nick. Makes manouvering in harbour a doddle!