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That damage is far worse than I had expected pre-opening the pics. I am far from an expert, but I have seen others recommend a scupper repair where you insert a section of PVC pipe into the scupper and seal with epoxy. The PVC sleeve gives structure and acts as a plug. I'm not sure this would do the trick in your case.
I think the deal with Malibu Blems is it's a limited warranty that is only valid for a very short term. I'd be curious to know if the leak has anything to do with the blemish, but it's my understanding that Blems are just as seaworthy as the normal production boats.
Last thought is you might want to re-evaluate your friendship.
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