Hey Carl...excellent choice of boats.
When the boat is under sail and hits some chop, the keel will move. I truly do not believe rope will last more than a short time under that kind of stress. The elements will eventually corrode the rope anyway. If it breaks with the keel up, it will swing down and will likely punch a hole in your hull. That
would be bad.
You have a good idea to replace it with stainless steel cable. I may have a picture of what mine looks like when it's replaced. Let me know and I'll try to find it.
As to the water in the boat, you will only find out for sure if your swing keel bracket is leaking by sitting her in the water. You may can get a hint that it is a possible problem by visually inspecting both sides. If they are rusty, corroded, or flaking metal, odds are they should be replaced. If you want to see what a bad bracket looks like, go here:
http://www.clearintent.net/C22
Another tell-tale sign would be rusty stains around the port side keel bracket; look inside that locker.
My brackets were in really bad shape, as you will see. When I pulled back the cover, mine also had water in it from the leaky bracket. I figured out that water would migrate along boat's hull, effectively in a "bilge space".
I'm not sure how water could find it's way through a cracked/leaky deck and into the bilge of this boat. IMHO, it's coming through the bracket. If so, I am sorry. It's a pain to fix.
As an alternative explanation for your mystery-water, you may have a leaky rudder post assembly. When our boat bobs around, a small amount of water will seep around the fitting. This water
can find its way into this bilge area.
Let us know what we can do to help (except drive out there and do it for you).