A side exhaust .40 like the old K&B .40, is what the boat was designed for. A good .21 will make close to the same (or more) power, but at higher RPM and with slightly less weight. Nothing wrong with the old K&B .40 for sport use though, or like Chuck suggested, an inexpensive OPS or OS .21.
A 32" vee hull is quite commonly used in .21 mono racing these days.

Duane