If you can mount the motor lower, the muffler will likely clear the frame and front wheel easily.
Try mounting the engine without the muffler attached. If you can get it so that the pedals clear, you can have the muffler bent to fit by a mechanic.
If you want to move the cranks out, you have to plan your work and work your plan. Moving them too far out will affect your chainline drastically, and may keep you from being able to adjust your front derailleur for proper operation.
You may be able to use a generic mountain bike crank, and it likely will have a larger tread (distance between pedals) using the same Bottom Bracket (BB), but you will need to also use a mountain bike front deraileur if you want to be able to change gears. There are several different kinds of front derailleur too, from top swing & top pull, to bottom swing and bottom pull, or bottom swing top pull, etc. There are different clamp diameters as well. SRAM and Shimano both make some cheap "entry level" ones that come with shims and can work as either top cable pull or bottom cable pull.
You need a new square taper bottom bracket, so it looks. You need to know what size (diameter of threaded portion, thread pitch, usually called English/French/Italian depending on type, and length of spindle) bottom bracket you have, and how much farther apart the cranks need to be to clear your engine. These old style bottom brackets are around 20 bucks. Most likely it is an English threaded 68mm.
