Fiberglass over styrofoam will melt. Since this is just a school project I would carve it out of the blue styrofoam and use sandpaper to sand it smooth. Its not like you are building a race boat. I agree with Ryan- do something like a cat.

KISS rule here...

Go for the NiMh batts, a speed 400-500 type motor will be OK. For props I would keep it small to keep the speed down. Unless you have a real good reason to go fast DONT.