Lightening up the flywheel does improve the peak horsepower output of the motor and allows it to gain rpm more quickly but at the cost of losing a little mid-range.
My F2 bike runs Yamaha race kit ignitor and pickup which has very little mass compared to the alternator pick up it replaced...it also originally had the starter motor gear removed off the other end of the crank. The motor was very peaky and in an effort to get some mid-range back we put the starter gear back on...this lost 1 to 2 hp on the dyno, but did improve the mid-range.
A lot depends on your riding style...Dave Cole who originally raced the bike use to keep it spinning at max revs everywhere, whereas us more mortal plebs prefer to have the revs a little lower coming out of corners so the mid range is of benefit especially on NZ race tracks having relatively slow corners and short straights between.
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