Jeff, I went through this last year and you are on the right track. What you have is a "federal flexible coupler"
http://www.henrysmith.com/couplingsfederal.htm It was an option when the boat was new. Look on the old manual pages for the W40 under the Westerbeke site and you will see it. The 4 big bolts on the outside are the trunions which is basically a big piece of rubber which is the flexible part of this coupler. All parts of the coupler can be replaced. The only bolts that need to be loosened to take the coupler off is the 2 bolts with the square drive that is closest to the stuffing and are facing toward the shaft. I put lots of penetrating oil in this area and mine came right off. The trunions join the 2 parts of the coupler to each other through the rubber parts. I replaced the shaft, cutlass, stuffing box, hose and put a newer type of coupling in. I decided to change out this coupler as there are lighter (almost half the weight of the federal) and I think better flexible couplers out there. I like the Vetus Bullflex but it will not fit in the space (maybe with a non drip stuffing box but it would have been close) I ended going with a Centaflex cf-m-127 coupler
http://www.centa.info/?show=products&c=&nr=40 and it seems to work well. I like the idea of a flexible coupler and the ones from R&D are really only for safety if you hit something hard. If you decide to stay with this coupler the trunions are supposed to be changed every so many years as they harden up. When I put mine on the workbench and pried it with the shaft - it did not want to flex so I think mine was due for new trunions. Good luck.
Richard
Salvation
#136