Is there a penalty for lapses if the PO files it as no longer his?
It's not a "penalty" it's a "fee".
I would redocument pay the fee one time plus the transfer fee. It will help if you have at least the last valid certificate. After that you just fill in the form they send each year and mail it back. You get a new certificate each year. Only the original document is considered valid.
You can also call the USCG Documentation center in Falling Waters, WV. Hold on to your seat. You will find them friendly and helpful with questiona. They get paid regualr and they are happy and efficient.
The location of your home port is virtually meaningless so long it is a place name in the US and you slap it on the boat per the lettering requirements. I would decide on the name and port so you can get that part free. If you later just change the name and port you have to pay (and you have to actually re letter the boat). It's also fine to just keep it the way it is if you like, but you must transfer title after it has been reinstated. This is what proves you own the boat!
Here is the FAQ link:
USCG National Vessel Documentation Center, FAQ Page
If it we me and I had not paid for the boat, I would insist the prior owner reinstate and deliver to you a current
document (make them pay the fees). Then you get a USCG Bill of Sale and make three original copiess - notarized. You can then mail one of those and the original current
document back to West Virginia with the fee (about $90.00). Most sales require the delivery
of a valid title. It appears you don't have one unless it was registered with a state. In that case you unregister it firrst and then redocument it.