Hi Richard; The engine and prop you have should fly a 8.5 pound plane with power to spare The 13x8 is not too much load I flew a Saito 82 with a 13x8 on a Lanier TR260 that came in @ 9 pounds and had lots of power.
We are dealing with a used engine with replaced bearings, Why?
Were the bearings replaced with the right type and were they seated properly?
If the old ones were rusty and the engine was ran the cylinder lining is damaged.
Send the engine in for service. Horizon has a great service department and do not over charge.
They will strip down the engine and call you before they replace parts.
And one tooth on a Saito has a major effect. (done that)