A converted Homelite engine will end up around 2Kg (4lb+) if you retain the magneto ignition.

Before leaping into massive modifications start with the simple things. Once the engine is running well you can later pull it apart and try more extensive mods, just be aware that the more extreme mods will kill torque. Extreme mods are better suited to the boat guys turning little props than aircraft spinning big props.

Remove only enough of the front mounting flangs of the case to lighten it. DO NOT remove much material around the coil area, the coil bracket will snap on a hard landing (I know).

Get someone to machine the fins on the flywheel down. Just take them down to the highest solid point on the flywheel. DO NOT snap them off or otherwise remove them as they give strength to the flywheel.

Replace the carb, the stock carbs are way too small to get the best power. A WA-167 is a good choice.

Replace the muffler, it's heavy and restricts the engine. There are pitts style mufflers out there.

Remove the crankcase/cylinder gasket and use a thin layer of gasket "goo". That will give a slight compression increase without affecting port timing much. Any machining you do on the cylinder or case will upset the port timing, which will require further work.

Try to source a "stuffed crankcase" rear cover. You can modify the stamped tin cover but I would rather spend the money on a decent conversion part. I wouldn't machine the rear of the case.

Fit a prop adapter and a 16x8 prop (25cc engine) and then run the engine in and tune it. You should get close to 8000rpm.

I'm about to run in a 30cc (same mods as above) and will see what revs and prop best suits.

Search through the engine conversions forum some more, heaps of good stuff in there.