Leaking transom / core repair?

[retep007]

Hey,

Pretty much DIY all jobs on the boat which I've had for about a year.

The boat takes on a bit of sea water when on a port tack and it's taken me a little while to find the source as wasn't coming from anywhere obvious.

I've now realised this was coming from the transom area, there is a seal that goes around the lip of the transom to deck level. There is also some sealant (I believe as it's quite soft in places) underneath which is partly broken and exposing the core (balsa?) which is a bit rotten in a few places.

I've attached a few pictures and looking for advice on how best to repair it while keeping costs down. Can I simply attempt to remove the bad wood and fill it with epoxy or something and then replace the seal?