There are lots of variables that will affect this including weight, wind and water conditions, tilt/trim and tab position. Also, are you sure that your speedo is reporting an accurate speed? The pilot hole on mercruiser drives often get fouled or clogged making the speedo inaccurate. Try comparing to a GPS if possible.
I have a 1998 268CR with a 7.4L carb'd B2 drive. The maximum recommended RPM range as indicated on my carb cover is 4200-4600 RPM. Make sure you know what your recommended RPM range is. Ideally, you should have a prop that does not allow you to exceed the recommended RPM but still gives you the best all around performance. For cruisers, generally hole shot and planing performance is far more important that top end.
Remember that a 268CR weighs 6500LBS dry. Add fuel, water, gear and passengers and you are quickly pushing 4 tons of mass through the water. Adjust your performance expectations accordingly. I typically cruise at 26-30 MPH at 34-3600 RPMs. I almost never run at WOT (except when planing) due to fuel burn. I can coax 42-45 out of mine but rarely choose to push her this hard.
Is 4500 RPMS too high for 35 MPH? While perhaps a bit high, In my opinion you are in the ball park for a small block, especially if carbureted. Its You could possible increase your prop pitch one size to decrease your RPM's by 3-400 but you will sacrifice some measure of low end performance.
1998 268CR 7.4L B2
"La Vida Loca"