Perry,
That's a bit of a leap to go from the subject of the thread, how mechanics like being mechanics, to asking about an engine STC. But since you asked...
An STC is a Supplemental Type Certificate. Your aircraft is issued a type certificate when it's creation is first blessed by the FAA. You can look at this as it's birth certificate. It's also it's authorization to "be." Any changes to the type design need approval, and this can be done by adding a supplemental type certificate to the original type certificate. When an STC is added, the new configuration or modification is made legal. Thus, to answer your question, if the FAA has issued an STC for your new engine, then yes, it's legal.
Along those same lines, adding a STC doesn't change your airplane from a warrior to an archer. It was born a warrior, and a warrior it shall remain. A warrior with an STC for a bigger engine. The original type certificate doesn't change, any more than cramming two more seats in a Robinson R22 would make it an R44. It's just a warrior with a bigger engine.
I haven't seen the STC, but I would assume that the STC authorizes the installation of a different engine, not merely upgrading the cubic inches for the existing engine. In other words, you aren't overhauling the engine into having more horsepower. You're waiting until overhaul time when you're going to pay to get more work done, and you're putting an entirely different engine on the airplane...and if it's done via STC, then yes, it's legal. A lot of light airplanes have such modifications. A really popular one is going from the 0-320 in the Cessna 172 to an 0-360...the 180 hp 172 is a great little airplane.