The only thing I would add is if this is an older OS .35 it's probably lower in power and higher in weight than more recent engines in this size range. For the Ace bipe this will translate into a heavier wing loading. You may be able to fly it, but the higher takeoff and landing speeds might make it not so fun. Weigh the plane to see if it's within the intended range. If yes, go for it. If it's too heavy, procede carefully.

As far as using the .35 on a .40 plane, if you are looking for speed you will not be happy. Many of the current ".40" size planes are really happiest with an engine in the .45 or larger size. You will probably do better to use the .35 in a .25 size planes that specifies something like a .25-.36 engine range. These will be smaller and lighter and the .35 will give you some speed. For example, I've got a World Models Aircombat zero. It flies smooth and I haven't seen any bad habits yet. I've flown it with a Saito .45, OS .25 FSR, and OS .32 FSR. All of these worked well.