Hello Dennis
It is good to hear from our antipodean friends.
What sail plan are you using in these conditions?
I would probably be using a double reefed mainsail with either just the staysail or the staysail plus yankee. I find the tiller pilot works well going downwind, but admittedly I do not usually have to contend with as much swell. If running dead downwind, I will pole out the staysail on the opposite side to the mainsail.
You are correct in that the tiller pilot does not react as quickly as the human variety and the boat can appear to be zig-zagging excessively, yet when I check the GPS trace the deviation from a straight line is much less than you imagine.
I do have some experience of using a deeper rudder on a similar boat. My previous boat a Winkle Brig had a similar rudder arrangement to the Capecutter, but it was much less effective than the Capecutter version. The previous owner had made an alternative rudder with a deeper blade which was hinged, when fully lowered it dropped about 2 feet below the skeg. It made a big difference to the sailing performance, particularly to windward, where the boat would point much higher. Downwind, it was easier to maintain control and I found that I could carry more sail without being at risk of a broach.
As for varnishing and tinkering, I have just finished varnishing my mast and spars and I am about to commence construction of a new 8 foot pram tender, using the same ply and epoxy technique used to make your boat.