drav8r, welcome to scale competition!

To answer your questions:

1/ a 4 stroke is probably better for your flying score, it won't sound perfect but most judges I know prefer the sound of a 4 stroke over a whiney 2 stroke. The problem is a 4 stroke will be taller & harder to hide in a P-51 which may reflect on your static score.
The muffler will be easier to hide.

2/ yes, providing they are a suitable type, Robart makes many different retracts. Consider wire legs rather than struts on a model this size & dress them up to look like struts. They will take a pounding & are less likely to rip out than struts & easier to fix at a comp. Make sure you can make the retract mounts in the plane AS STRONG AS POSSIBLE. Try to tie them into as many ribs as possible, re inforce with ply, try to tie them into the LE as well. A P-51 has a retractable tailwheel as well so if you don't fit that your flight score may suffer.

3/ Monokote? Judged from 15 feet away probably o.k. It won't last as long as a painted finish though, try to fuel proof the model as good as you can. Consider glass & paint. - John.