Very useful to have the piccy. This type of arrangement does provide some support for the shaft because you have the gland packing around the shaft and the flexible connector is stiff but does allow some movement. Note that you have a water feed from the engine - have you kept this? Also the end of the tube is a bronze casting which you may find has enough "meat" to machine to take a length of cutless. This will give positive support and ensure that the shaft runs true. However, if you do go that route you will need a flexible coupling to take up engine movement. If the shaft is knocking against the bronze it sounds far worse than it actually is!