Yes, to small a tube can cause loss of power due to excessive back pressure. I did know a gentlemen in Dayton, Ohio though who consistantly run his exhaust thru the plane but he used a very large diameter tube which exited the tail like a jet exhaust would. And yes, two cycle engines get rid of their excess heat by passing it out through the exhaust in the oil. If you lean it out enough to cut down the oil in the exhaust, you will soon be buying a new engine as the one you are using won't last.