The decision to repair or replace is yours to make. My comments offer no warrenties or guarentees. Just comments.
I would get several opinions and weigh all information.
I think that it can be repaired. First is you have to kill the mildew/mold in the wood. In the process of doing so, you will ruin the stain of adjacent areas. If you leave mildew/mold in wood it will continue to damage adjacent areas.
There are a products for getting rid of mildew. Remember you have to get beyond the surface. Old fashion bleach works but is alleged to damage cellulose structure. Painters us wood bleach which is not bleach but oxalic acid to kill mildew. There are other products, I leave it to you to search them out.
After mildew removed, there are several products that penetrate into the wood stucture such as 'Get Rot' and 'Rot Doctor'. These are essentially thin epoxy which is drawn into the cellulos stucture. These products have web sites which you should find and study. An example web site is:
http://www.rotdoctor.com/
These products are epoxy and as such have a degree of strength. There are other products out there in the home repair and paint departments which are not epoxy based but do penetrate into wood. I recommend for your purposes to stick with epoxy because of its known strength and track record.
When trying to get penetrating epoxy into the wood, many small drill holes will get more into the inner parts of the wood structure. These holes will initially fill then the epoxy is absorbed into adjacent areas. Refill unit they stay filled.
Some repair people use regular epoxy with 10% epoxy thinner to achieve the results of thin epoxy. Keep in mind there are formulated thin epoxies designed thin from the get go.
I would study the West System Web Site and maybe get their book(s) on epoxy repair. There are other good books, articles and web sites that provide good instruction. See:
http://www.epoxyworks.com/
Unfortunately products such as 'Get Rot', et al are sold in dinky quanities. There is at least one outfit that will sell thin (read penetrating) epoxy by the quart. That is a funky web site company:
http://www.epoxyproducts.com/
I have used their 155 Formula and it does the same job as penetrating epoxy. They also sell a cleaner formula 661 which I highly recommend anytime you are working with epoxies.
While they sell specific tints there are other companies that sell pigments that will work with epoxies. Remember that epoxy will not stain like wood. So the areas that you epoxy and want to eventually look like wood will have to be tinted from the get go. Then the adjacent areas with real wood can be stained.
Good luck if you try the above. If you plan to race, you put a lot of stress on the chain plates and should consider new solid bulkheads to sustain the loads.
Also on the 26 the area under the chain plate coverss is probably destroyed and you need to fill voids with epoxy to restore strength to that area. That is a whole other project that must be done whichever approach you take.
Ed K
26