It's a very simple equation, less power means, less equal. Think about it; With less power you spend longer on max throttle, less time on the brakes and part throttle, thus driver input and skill is reduced in every way. Meaning that even small differences in engines can make big differences on track.
For comparison if a top SP GX160 is 7HP. We raced 5HP GX120's. With only 5HP tiny engine differences mean't huge differences in lap times. On average we boiled it down to 0.1hp being worth at least 2/10ths of a second. Providing and maintaining equal engines for competitive racing was almost impossible.
IMO one of the reasons Honda cadet has become so successful is because engine outputs have risen above the point where small differences are that evident in lap times and thus the racing is relatively speaking very close. If you drop power, I predict you will lose this close racing.
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