While others are right that replacing or rebuilding the engine is best, I was faced with the same problem last year - a dead engine and limited funds. Add in to the mix access to a 25hp Suzuki Outboard long shaft for very little money, the boat being moored far, far, far from where I live and where the limited number of diesel mechanics in town are not willing to work on a sailboat engine, and mounting an outboard made sense.
I mounted it dead center, in place of the ladder, using a bracket from Westmarine. Got a tiller extension for the outboard throttle. It's worked out great. Docking, I lock the rudder and use the outboard to steer - much easier to maneuver in reverse. Once out of the dock, I lock down the outboard and use the rudder. I did a 5 day cruise with it last fall and it performed great - easily pushing the boat through some heavy weather and strong currents.
Everything everyone has said about an inboard being better is true - performance, aesthetics, etc. But, will it work? Will it get you sailing until you can afford replacing or rebuilding that inboard? Absolutely!
Good luck!