I was bolting on new bravo Transom's to my 29 formula p.c and it appears that the lower transom is a little soft, as I tightened the lower bolts the inner transom plate cracked! The rest of the bolt's torqued fine. And the seal is tight to the hull. Will this be o.k!

No, not really okay.

what do you do? replace transom?

Yessir. At least the rotten portion of it.

Find somebody with a moisture meter to check the transom to determine the full extent of the soft/wet wood.

Then you can make a decision.

That could be a big job. Not sure how the transom/stringer arrangements are in your boat, but it's possible that water has migrated from the transom to the stringers (or vice versa). Definitely need to get it checked out, once it's in there, it's only going to get worse!