"The reason for this is that there will be almost no load on the engine, ( it only has to turn a shaft in a dc motor), and so it would burn out very quickly. Therefore he suggested that I use a marine engine that is water cooled:"

You will have never no load. Even when not generating electricity the magnets in the generator will have some load. When generating electricity you will have plenty of load. Almost .3 HP of it. The torque required depends on the speed of the generator and how it is geared. Does it have to be a DC generator? An alternator would self regulate the speed somewhat. With a generator you will have to have a crude Governor, just enough to pick the engine up from a high idle to full power when you have a load. It need only to keep the RPM within a couple thousand RPM. The helicopter engine and 4 stroke LF mentioned are good ideas. But the prof said it had to be a two stroke? Does he know about the small 4 strokes that are available, or did he assume that such a small engine had to be a two stroke?