Your muffler looks fine. It just needs a good wire brushing and painting.

I like two outlet tubes of at least 1/2" i.d. for 25cc engines. Bigger is better...

I think you will notice a nice difference with a larger carb. However, when looking for power, I always recommend that people check the ring gap. It is almost always too large. Optimal stock ring gap is .003". That's about the width of a piece of paper.... Any larger is giving away power, and most used engines I take apart have an excessive gap. Try Frank Bowman for rings.

I once did an experiment. I had a Homelite 30cc with a larger than optimum ring gap, (about .020"). I ran the engine and it started, idled, and ran well. Then I put a Frank Bowman ring in it, and after only one tankful the rpms were up by 800!!

AV8TOR