The solid shaft you have in the hull at the moment is a 'local model shop' cheapy. It is a brass tube with phosphor bronze bearings at each end. The inner shaft is a solid rod, threaded at both ends (probably 2BA if the shaft is as old as the hull), one end screws into the ally part at one end of the rubber coupling and the prop screws onto the other end. Both are secured with locknuts. If you go down the solid shaft route, these are still available (although now in M5 thread) and are adequate for a sports boat. The M5 props are available in both plastic and ally in a range of sizes (you will probably need an ally 1818 or 1919, or plastic X40 to start with).
You would need to buy a coupling for that particular engine/shaft combination ie. threaded M5 one end and whatever thread the crank end has (ask the supplier if you don't know).
The rubber couplings with the grub screw are used with ball-raced competition shafts which have a plain 5mm end onto which a flat is ground. The grub screw then tightens onto this.
When fitting a submerged shaft, keep the engine as low as possible, leaving enough room to get a starter belt under the flywheel, and have the tip of the prop 1 - 2mm away from the hull underneath. The shaft you have will give some idea of prop and engine position and shaft length required.
A flexi shaft drive is NOT better, just different. It has its own problems ie strut height, shaft angle, rudder position, etc. Most opt for the submerged drive until they get used to the model, but to be honest, if you've got THAT keen, you will probably be looking for a faster engine and a sleeker hull!
Danny