More info would help ...
I think the answer is Yes, the wrong prop could be the cause of the poor performance. But at this point, changing the prop probably won't bring the engine back to correct performance.
First of all, did you witness this performance when you purchased the boat recently? I suspect that this problem didn't happen overnight. Did the PO also suffer this piss-poor performance? I would question the re-build within 100 hours ... are you just taking their word? When you did your check-out sail did you run the engine under load? What did you find then?
I'll relate my experience and maybe you can relate. Our boat came with a Yanmar 1GM and we were told that it had been re-built in the past but no date or record was provided. It ran fine when we purchased so it wasn't an issue to worry about even though we were also told that the boat was slightly "over-propped". This made sense because we could achieve approx. hull speed (approx. 6.3 knots for 22' waterline) at 2200 rpm. At 2400 rpm we had some black smoke while the boat reached its max speed. At idle, max rpm was 3600 to 3800 rpm. The characteristic that I did notice and fret over to some degree was the way the engine labored to get up to speed. But I also thought the engine was a little underpowered for the boat (5700 lbs approx.)
All in all, I thought no big deal, we hardly use the engine, and when I did give it exercise I would run at 2200 for miles with satisfactory performance. We used the engine that way for about 25 to 50 hours per year from 2004 to 2011 (8 seasons). But at the end of 2011, I noticed the appearance of gray smoke ... since it was cold, I thought it was more like steam, but hindsight now tells me different.
Performance in 2012 sucked. Noticeable gray smoke, rpms and speed dropped off steadily thru the season. It wasn't nearly as bad as yours, but I think it was around 2000 rpms and maybe 5.5 knots top speed and getting worse as gray smoke persisted no matter how many remedies I tried.
I wanted a new engine so I re-powered with a new 2YM15 prior to 2013. I decided to keep the prop (2-blade) and I think it is matched correctly because max rpms under load can exceed 3600 rpm, top speed is close to 7 knots (surprisingly higher than hull speed). She cruises easily at 6.5 knots at 3200 rpm. This is all based on GPS speeds with no current (in a lake). We don't have black smoke at any power-setting. I'm a happy power-boater!
You've provided no information on the nature of your purchase. Hate to say it, but the PO possibly had it over-propped (Don could be very correct in saying it's in the "ballpark" ... it probably is) and the cumulative neglect caused a recent drop-off in performance that could possibly be pretty steep. Maybe the PO said he did a "re-build" when all he really did was try some remedies to get the boat in decent shape to make a sale. If he saw the hand-writing on the wall, it's possible he thought it would be best to get out quick before the solution gets really expensive ... which it might be now.
If I'm way off base on this speculation, I apologize in advance. But your description is very light and it leads to speculation. I would look at all the symptoms (and describe them). Do you have smoke? What color? Black, gray, white? Gray was described as a potential problem with the seals. They fail more readily when the engine is persistently run at low rpms. The injection can also be a part of the problem. I have very little diesel knowledge so I can't speak intelligently about that.
Your engine may be a good candidate for repairs or even a re-build. Get some opinions based on all the symptoms, not just the comments you here about the prop. It might be wrong but I have a hard time believing that it is so dramatically wrong that the PO suffered with this lousy performance for years. It sounds like a problem that you inherited with the boat, not something that suddenly appeared. I doubt that somebody suddenly just put on a ridiculously over-sized prop and expected you not to notice.