ORIGINAL: B.L.E.
There isn't even close to enough extra friction in a bushing to account for the horsepower difference. Ball bearing engines make more power for a lot of other reasons. For example, compare venturi sizes of a bushing engine to a ball bearing engine of approximately the same size.
There are also examples of engines where the plain bearing engine is at least as strong as the equivalent ball-bearing model. The .65 LA will actually turn several props faster than the .61 FX for example. The Thunder Tiger GP-61 is another example of a stupidly powerful plain bearing issue, it too will out-turn most ball-bearing .61s on a number of props. The K&B Sportster line from MECOA is another example of plain-bearing engines that are by no means slouches.
Plain bearing engines aren't inferior to ball-bearing engines, except perhaps when it comes to very high rpm flying like pylon racing. For general trainer, sport, and aerobatic flying, plain bearing engines work great.