For such a small boat I would resist going for a hydro and would play safe using a submerged drive mono-hull design. AA batteries can have huge variations in performance and most are not really suited to discharge currents above 2 Amps. I have personaly found that GP 1300 mAH nimh cells are better than anything else I have tried and are good for up to 8 amps. The motor I suggest is the Graupner 4.8v Speed 400 linked to a graupner 26mm carbon fibre prop. Make everything as light as possible. Futaba receivers are generally the lightest of the standard 2 channel variety and a micro servo will also save some weight. Have a look at some of the boats on this site for more ideas (some of mine are shown here)
http://www.floppyracing.com/
Neil McGrath
http://homepage.ntlworld.com/fast.electrics