Yes, yes that is an exhaust tunnel. I hope larry won,t mind me answering Something not often provided these days Using a two stroke glow engine the cylinder is rotated down slightly from the 90 degree sideways mount until the stock muffler fits in that tunnel. This usually results in a cylinder position of 135 degrees.
I think I have just one airplane with a pitts muffler and all the rest I use in most cases the stock mufflers. As most do not have a tunnel these days its very simple to do you own and where you want it. Just dremel away a notch in the firewall as you see there a little I/16th balsa sheet water soaked and rolled then fitted in the slot a little thin ca. Your done. Most times I just paint with some thinned epoxie or if I am real lazy I just spread out some thin ca on the bare balsa for fuel proofing.
John