No experience with the Westerbeke, but as far as I know all single cylinder diesels vibrate a lot. Some folks are OK with that and may even like it, but if you are looking for smooth and quiet you'll probably be disappointed. I think you will find there is a love hate relationship with the Westerbekes, that is some love them and others hate them. I believe the Westerbeke company is now owned by Universal, and uses different engines including Kubota and maybe Mitsubishi. Horizon Cats were available with outboard power, and I wouldn't be too sad with a Yamaha 9.9 Thrust on the back. Nice motor. I actually considered a HC at one time and decided I would get an outboard for the following reasons: leave more storage space in the boat, less noise in the boat, no heat in the boat, ease of service and replacement when necessary. Of course the cost is much less as well and more than pays for any extra fuel consumption compared to the diesel. I suppose many just don't like the aesthetic aspect of outboards, but if you get past that then an outboard on a small boat makes a lot of sense.
I have had plenty of experience with porta-potties, and they have become one of my few hated things about small boat cruising. I guess they are fine for day sailing, but someone has to empty it and that task typically falls to the skipper. For extended cruising, they do fill up pretty quickly and it is sometimes difficult to find a location to empty them, generally pump out stations don't have facility for emptying portables. Almost everyone I know that has used a portable has a tale about a nasty mishap while emptying it, myself included. If you empty into a septic system the chemicals used in the portable may cause damage to the operation of the septic system, and so most marinas seem to frown upon the practice. I hate sneaking into the mens room carrying a full potti and when you upend into the toilet, the fellow in the next stall makes a quick exit. Not a pleasant task.
I completely agree with Craig that a regular MSD will take up a lot of space and as you mentioned, I understand Canadian rules for discharge are much more stringent than the US, as in nada. If you get stopped in US waters for a Coast Guard check they will inspect your overboard "Y" valve and if it isn't secured in the closed position you may get written up. Even if you are outside of the no discharge zone, most MSDs don't have the plumbing to allow a discharge of the holding tank. A regular MSD is great for offshore cruising, but not great for small boats and coastal cruising.
You may wish to consider a composter as they have several advantages. They are pretty much self contained, go a long time between recharging (no pump outs), have no odor, and are much better for the environment. Plus they generally have a full size seat.
My 23 pilot house came with a standard MSD, and I plan to replace it this year with a C-Head while on the hard. The MSD has proven to be a real pain, especially because of needing frequent pump outs. I believe the C-Head will fit the location for the portable in the HC, although height may be an issue. However since it's not under the v-berth you could afford to modify the cover to fit. It is the smallest and least expensive of the three major players. I also like that it's easily serviced and easy to repair if needed. take a look: http://www.c-head.com/
Keep us updated if you would,