Hi BA, I don't know of a 2.7 hp Kirby Lauson, in horizontal crankshaft versions they had the HK25 (2.5 hp) and the HK30) 3 hp) - I don't know of any others.
Parts are available from the US, as Tecumseh spares, for your Kirby Lauson engine. There has been a thread here not long ago detailing an overhaul of one of those engines, and giving sources and prices for each replacement part. However, you can easily fit a more modern engine as a replacement, either permanently or while you overhaul the Kirby Lauson. The only point that needs to be considered, with regard to popular 4 stroke engines from either Briggs and Stratton or Honda, is that the Kirby Lauson had a 3/4" output shaft while the smaller engines from other manufacturers tend to be 5/8". Scott Bonnar made engine-side clutch halves for both Kirby Lauson and Briggs and Stratton engines, but replacing your 3/4" one with a 5/8" one would cost you around $80, while choosing a replacement engine with a 3/4" shaft may not cost you anything.
So far as your plan to fit a Honda GX160 goes, that is of course a nice engine, as all of the pushrod Hondas are. I do not know its output shaft size: if it is neither 3/4" nor 5/8", Scott Bonnar did not produce a clutch-half that will fit it, and you would have to have one made or altered to suit.
Unless your mowing conditions are quite unusual, the most suitable Honda engine would be the GX120, with an advertised 4 hp. A larger engine such as the GX160 (advertised as 5.5 hp) would only impose higher loads on your mower if you actually used its greater power. Something you should perhaps consider is whether you have a single rail engine mounting platform (found on very early SB45s) or twin rails. The twin rail mowers are somewhat prone to fracturing the front rail at the inboard engine mounting bolt. While this is not especially difficult to repair, and even to reinforce, it might be something that is more likely to happen with a more powerful engine.
Changing the design of a Honda muffler would be something of a hassle. Briggs used to have an interchangeable muffler with an external deflector to direct the exhaust sideways instead of rearward, but I do not think Honda does anything similar.
I think all of the small Hondas (GX120, GX140, GX160) have the same layout and the muffler outlet points in the same direction on all of them. I also think the engine external dimensions are much the same. The starter on the right side of the engine will of course project well beyond the right side of the mower with any of these engines - probably including your Kirby Lauson.
BladeButcher, the complex conversion you did to fit that Honda GX140 was, as far as I know, entirely due to your wish to not have the engine project past the right side of the mower. Small Honda engines, Briggs engines, and Kirby Lauson engines all have the same bolt positions and the same output shaft position: except for output shaft diameter, interchanging them is just a bolt-on procedure.
Last edited by grumpy; 29/11/12 08:18 AM. Reason: Add detail