to get the last part of the inner muffler out, drill out the little spot welds carefully so that you don't go through the other side, that's how I've done it before.

you're going for an air cooled boat engine I'm assuming? one the one I set up a year ago that I haven't finished yet (got my airboat going instead) I trimmed the pull start housing similar to what you did but I left more of the ducting for the cylinder but it'll probably be fine.