That board goes down 4-5 inches. Although it is not structural I would like to at least seal the whole perimeter, since it will be an open wound. I must remove the existing hatch cover in order to properly mount the new windlass box.The photo you have there shows the end grain. How far back into the original opening does that rotted wood extend? If it's just a support for the opening that only extends a few inches back, remove it. You could replace it with ply (all sealed up - three coats of resin and bedded where the screws penetrate). You might also consider replacing it with a thin piece of aluminum bar stock which will never rot. If it goes way back and is essentially part of the boat I'd still remove the portion of the rotted ply that is within an inch or two of the box opening. You can then install a new piece of wood or aluminum. If you use wood you can thicken some resin and glue it in, for aluminum I'd use a sealent like Sika 291 and some machine screws.