Rereading this thread I have a feeling that there is more than meets the eye. You say you have the exhaust routed to the rear but you didn't say what you're using as a muffler.
You also said that the "mechanical noise" from the engine is louder than the exhaust or intake sounds. If that truely is the case you have something wrong internally. The engine itself shouldn't be that noisy.
Could the sound you're hearing and objecting to be described as gear noise? A whine or grinding sound? The reason I ask is that I had an engine that was extremely noisy, gear sound, and it was traced to a primary gear (small gear on right side of engine) that was drilled off center and also angled. When it rotated it meshed with the larger gear, secondary, and wobbled. It was crazy loud and very annoying. I replaced that gear with a good one and dramatically reduced the engine noise.
You can check for this condition by removing the spark plug, disengaging the clutch and spinning the engine with a drill and screwdriver bit on the slotted screw holding the primary gear to the crankshaft. Watch that gear as it spins. If it wobbles that means it is not engaging the teeth on the secondary gear properly and will produce noise.
Tom