I had a Yanmar YSE12 in Redwing and when I pulled it out the Stern lifted a inch or more. 

Those little Yanmars weigh almost nothing. I once had one in a boat and was easily able to lift each end of the engine by hand when replacing the mounts. So the engine will only be a very small percentage of the overall weight of your boat. Removing an old diesel from a boat is a good thing, this is coming from someone who is a huge fan of outboards. You get rid of all the complications of a diesel motor including oil leaks, the smell of diesel, and the complications of propshafts etc. I am guessing you might be fitting an outboard as an alternative? In which case even though an outboard is not very heavy the weight would be right at the stern which would help to counterbalance the weight lost from the diesel. You could also utilise the space now empty because of the removal of the diesel for storage, or fit a flexible water tank which will put some weight back into the boat.

You will loose the battery charging capability of your diesel motor, but this can easily be replaced by solar, or depending on which outboard you choose it may have battery charging capability.

You don't say what sort of engine you have, but a typical engine and gearbox for a sail boat of that size would weigh in the region of 120 kg. It's not a massive amount of weight, and is comparable to a couple of smallish people. I wouldn't worry too much about it. If need be, moving a few things around in the boat should be able to compensate that.