In that size range I think you will have an engine that could run on biodiesel. It will not have zero vibration unless mounted to a concrete slab or is of unconventional design. It will not be so incredibly efficient that the exhaust will be at ambient temperature and pressure without a muffler. I suppose the engine won't need a cooling system either?
Forgetting everything that is already known about engines is not such a good thing. You have to use everything we do know about engines, chemistry, and physics to even approach what you are talking about. Do you think the clueless students going into college don't have similar dreams? They do, but then reality sets in when they learn how the world around them works and why there are real limits to what is possible.
If you are trying to say that you can build a naturally aspirated, two stroke, compression ignition, carbureted 1.2ci engine that makes 2.2HP and has good fuel economy doing it, I don't think it's possible. 2.2HP from a 20CC engine is pretty optimistic. The Zenoah 20CC makes 1.7HP.
Do you have such an engine operating on kerosene? The fuel is not really relavent to the engine output. You could design your engine to run on readily available and publicly accepted fuels like gasoline or diesel. You could begin making your milloins and changing the world. Then you could consider making modifications so it runs on biodiesel and veggie oil or whatever else you have in mind. Why make it so hard on yourself? Start with a fuel of known characteristics. This will allow you to observe how it works and how it doesn't. The truth is that simply changing to a different fuel won't make any significant changes to the engines efficiency or power output. It can in the case of biodiesel make an instant change in emissions, when we know what the initial emissions are.
If you succeed in your quest I will personally fly out to shake your hand and inquire about investments.
Don't let my comments stop you though. They aren't stopping my work. I too see the need for small simple efficient engines, but I think some university or large company will beat me to it.
No you tell me how you intend to get the exhaust so cool. And what the specific fuel consumtion of your engine will be or is.
It's been hundreds of years since the general population was clueless. If you have ideas to how you will make it happen, post them here for a peer review, like is done in most fields. If your work is so earth shattering that you need a non disclosure agreement contact me privately. You'd better get that patent application filed while your at it. I've looked at so many new engine concepts online that it's funny. I was following Randcam stock for a while. The Scuderi sounds interesting. I found a Polish engine today.
http://new4stroke.republika.pl/ Take a look let me know your opinion.