Once you decide on an engine for the plane (my recommendation is to go with the largest capacity engine that falls inside the recommended range), you will have to decide whether to cut the cowl or try to get another muffler.

In reality, it is a cost/benefit decision. If you want to re-create a scale-like look, then you want to try to get the muffler inside the cowl, so a pitts style muffler, or something similar will have to be used. If you are content with having the muffler outside the cowl, then you will have to cut it.

Regardless, you will have to do a fair amount of cutting to ensure that there is adequate airflow over the engine for cooling. A general rule of thumb is that for .40 size planes you need about 1sq-inch of air inlet area at the front of the cowl, and twice as much for the air out-flow.

gus