The easiest way would be to leave them and paint right over them again. There is nothing functionally wrong with this and you can embrace it as part if the history and character of the boat. Sort of like that tattoo you got when young and now regret.
If they used one part paint, you could try to strip it. Take some paper towel, soak it in acetone or paint stripper. Place it on the transom and cover with foil (not cellophane) well taped to prevent evaporation. After 24 hours remove it. If the paint is soft, you can strip it instead of sanding.
If it were my boat, I'd have no problem doing what
@jssailem said. Sanding the letters out, feathering out the edges of the old paint, maybe a couple coats of primer strategically placed to hide where the letters were, and then a light sanding and paint on part or the whole transom. See how it looks. Does it pass the 10ft rule? (If you can't see the repair from 10ft away, it is good enough.)