martup,

I built the LD II from RCM plans this past winter - easy build and a very nice flying plane.
I had the same problem with engine selection - finally decided on an MVVS 91/purple pipe from just engines - this seemed to be the only afordable/available engine in this size, and as a bonus you don't need nitro - makes practice a bit cheaper!
If you decide on a side exhaust, I don't see any easy way to run the pipe under the plane and still look reasonable - I'm sure it could be done, but not easy.

Gerry