Sounds like the seaweed clogged your water intake, the lack of water flowing through your power head sounds like it got really hot and cooked your motor.

Lucky boys. Sounds like straight heat causing fire

Expensive way to find out you should always back down if you run over a clump of weed, even for performance reasons.

Try going for a run with a pillow over your face and you will understand how your motor died ;-)

 Lesson learnt!

So is the motor cooked aka a bin job or can it be fixed?

no overheat alarm?

 Did you feel the motor after putting the fire out?  Was it red hot paint bubbling etc?   Was there water out of the tell tail before you turned it off?   

 If it will still run ok, get the alarm system fixed.

If its EFI it should have at least alarmed and derated.

Normally most EFI outboards perform a self test when you turn the key on though.

can you turn the flywheel manually?

 Tried re starting the motor? Is there tell tale signs of where the fire was? Electrical wires burnt, air intake burnt, cowling etc??

Maybe take it to some marine mechanics for a diagnosis.

Also, is it insured? Could be covered if it is mate. I know 2 blokes thatve cooked their engines (1 left earnuffs on), and the motors were replaced or rebuilt through insurance. 

 Capacitor is still ok on the main wiring harness, thats if it has one.

 Basics first

if your mechanical knowledge is that limited take it to an outboard mechanic

the damage may well be covered, policy if insured covers the motor if it strikes anything other than water, seen plenty of claims accepted for this cause and ditto fire damage was well, pm me if you need a hand with insurers  

Just so you don't endanger any insurance claim, notify your insurance company (if insured) with the details of what has happened and ask for instructions from them on what action/s you should take. Get this in writing (email etc) If you tinker around with it your insurance may null your claim.

have to say that it would have to be a pretty savage overheat to actually set fire to any anciliary equipment

My guess, the seaweed had nothing to do with it and it was an electrical problem/fire.

Get it looked at by a mechanic-pretty simple...

 Sounds like your not to mechanically minded.   It could be as simple as a wiring short that caused your problems and maybe a simple fix.  Not unheard of for an unfused wire to rub through  and would defineately catch fire. Id take it to a mechanic he will give you the good or bad news in very short time.  A very hot motor is not hard to spot they beam heat and you would of felt it getting the cover off. They also have a warning buzzer and it is loud.  

I would say all modern marine outboards have overheating protection. Typically, if the motor reaches a specific temperature it will drop the revs down to 1800rpm or so which is what you experienced with the jerking.
I would go along with Cruzy, and say it could have been a short and the seaweed being unrelated.
Give Arthur Page a call who is the local Mobile Marine Mech. in your area. He will more than likely come down for a look without charging you anything. I very much doubt the engine is seized.

Intake blocked causing overheating (and possibly drop in revs as per aaasnapper), this heat likely contributed to melting wire (proximity to motor??) hence shorting and fire (small amount of oil/petrol deposits igniting/combusting).

May not be seized - need a certified mech to look at it and see what the damage is - ring insurer and advise them your doing this before organising mech - just tell them your giving them a heads up min case a claim is needed - if they agree with this action no probs in future re policy/cover

 i have heard of a few mercs with electrical fires and burns. sounds like a coincidence it happened at once but i reckon 2 seperate problems

 No insurance - old boy didnt think it was worth it - he now thinks otherwise.