Nice con, Gh0stRider, lol!
On a second glance, I don't see the throttle cable or fuel line on the pocketbike engine.
You can easily move the clutch engagement to just above idle speed by changing to a $9 clutch from davesmotors.com.
You're right that the stock muffler limits rpm. I had thatsame problem on my Mitsubishi until I installed an ADA S1 expansion pipe. The sky was the limit with this pipe, even with my 12,000rpm+ GP460 engine.