I built a hybrid using a 1990 KDX motor in a 2003 KX125 frame. I'll take a stab at your questions although it's been a while so I'm not sure if I remember all the details off the top of my head.
1) I had the 1990 engine so I used that and searched for a 2003 and newer chassis which has the head stay on the rear like the earlier KDX. This eliminated the welding and grinding on the head.
2)-1) I don't remember (it's in my notes) the exact amount but I had to cut the swingarm since the KDX engine is wider. The inner sleeves for the bearings needed to be accurately cut and they are hardened steel. The engine also needed to be bored larger since the KX swingarm bolt is a larger diameter.
2)-2) I just had to make new aluminum plates to tie the head to the frame (on the rear of the head). I laser cut them at work so if you are "hybridizing" similar models let me know and I'll laser cut some more.
2)-3) Wasn't an issue on the models I used due to the head stay on the engine and the chassis both being on the rear. The tank fit with no issues.
2)-4) I think I used 12 ga material and just made them fit and look OEM - didn't write a laser program for that.
2)-5) Again, not an issue with the model years I used.
2)-6) I had to machine a tapered spacer ring since the airbox boot was larger in diameter and farther back than the carb inlet. I basically machined the ring out of aluminum, split it (slotting saw), stretched it over the carb inlet (with some RTV in between), and clamped the air boot on to hold everything in place. I suppose there are other ways of doing it but this was pretty professional and works well. I can supply prints of the ring if needed and the part itself if anyone wants to pay for the machine time.
2)-7) I built a pipe and silencer basically from scratch. I started with parts I got from Dyno Port since at the time they didn't have a pipe for the conversion with the newer chassis. They may have one by now. This was by far the most time consuming part of the project but it turned out well. If I recall correctly, there were about 15 separate pieces to the pipe that had to be hand fitted together. Once I had it tacked up, I TIG welded it, Scotchbrited it, painted it with VHT clear header paint, and baked it.
2)-8) Wiring was easy - the hardest part was figuring out where to mount the CDI.
3) The welding is fairly straightforward if you're good with light gauge TIG (for the pipe). I feel that you should be accurate and precise in all the work especially when narrowing the swingarm and the inner bearing sleeves so this may be something to send to a machine shop.
4) That totally depends on what you have to pay for the KX and what you can get out of what's left when you're done. I had the 1990 KDX with many mods. I bought the 2003 KX125 for $2700 - it was 14 months old at the time. The pipe and silencer parts were 2-$300. Other than that it was nickel and dime stuff. I think I auctioned the left over KX parts for around $800 and sold the KDX leftovers to Fredette for $600.
Other things I remember:
a) I used a Fredette kicker (ground on a little for clearance) since the OEM one hit the frame.
b) I did have some problems getting a clutch cable that was long enough for the KX chassis (and CR high-bend bars) and can get you a Motion Pro part number if needed.
c) I lengthened the shifter 1.25" since it ended up in a different relationship to the foot peg.
d) This is a sweet bike and I enjoy it a lot. I don't think you'll regret doing it!
There are some pics of the bike when it was fresh on the msn KDX site:
http://groups.msn.com/KDXRidersCommunity/kx200gn83tmia.msnw
I also have pretty good notes on the job if you need them and would be happy to help in any way I can.