A moderately smaller muffler will only slightly reduce the maximum power (perhaps by one hp or a little more), it won't affect the way the engine starts or runs. When you get everything else working properly, a muffler upgrade might make you feel better (I admit it would make me feel better if it were mine) but you seem to have more important things to do first, in my opinion. Meanwhile I'm wondering how you control the choke - is it done with a control rod reaching outside the engine compartment? Does it open fully and close fully? Is your carburetor now leakproof? Have you checked the intensity of the spark?
