If I nurse it and finally get the dinghy to start hauling arse the motor will go just fine and then all of a sudden start to really rev out and feel as if it has fallen out of gear. But then if I back off the throttle and then increase slowly she'll just keep going again. Is there some kind of clutch or something in the drive train that could be slipping causing this these characteristics?

Yes, there is a clutch inside the gearcase to engine both Forward and Rev gears. Not a common problem with Mercury product, but sometimes it happens.

If you can, verify that the prop is not ventilating first <---coming out of the water.

Once verified, and if need be, remove the brg carrier nut located behind the prop and take out the propshaft. This gains access to the clutch...you can then check its condition.

TMD