Re: Many questions, wanna make a purchase!
Gear high. I know the terrain where you live well and hills are non existant. A well tuned 2stroke with a 36 or even a 32 tooth rear sprocket should be able to provide your 35/40 desires. You also have the added advantage of sea level tuning. That can be significant where horsepower is concerned. You'll need to pedal assist from dead stops but from there the engine should provide enough power for you.
One thing to remember and it was mentioned above by Wild Bill, brakes, brakes, brakes.
It is a bicycle, not a factory designed or built motorcycle. It has bicycle wheels, bearings and bike brakes. Before you get too involved with attaining high speed, make sure you can stop the thing. I'm a disc brake fan and user but drum brakes get good reviews too as well as quality rim brakes with the right pads. Rear wheel coaster brakes are fine as long as the front has good brakes. Rear coaster and front disc works well together.
As to your sprocket question. The 9 hole sprockets are designed to fit a wheel with 36 spokes. Some members have adapted them to a 32 spoke rim but it isn't recommended.
Not sure what you mean about "transmission" not holding up. Are you talking about the rear hub? If so, the hub isn't in play with engine power. Only if you install a so called "shift kit" will the rear hub be subjected to engine power. Otherwise only the bearings are under any stress and that's not a concern if they're well lubricated.
Good luck and let us know how you're doing on your project.
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