I'd first try to add a fitting to seat tube for an arm to push down on a chain-wheel to take slack out when swing arm rises and loosens drive chain - looks like hard job tho.
With such a low single pivot point, I think a shift kit is the only option. Otherwise the engine chain length would vary way too much with the suspension travel, and the engine would be constantly activating the suspension.
But if the P.P. is concentric on the BB, what type of BB does it have? Can the freewheel cranks be fitted to this?