I don't know NY law, but here in Phoenix 48cc @ 20mph it is just considered a bicycle.
No ANYTHING like a drivers license or tags required to own and ride it anywhere you want, even bike lanes.
The thing is, the cops actually prefer you ride 30 on a 40 MPH road just so you are less of hinderence to drivers.
As far as engine size goes, well, all my builds have one motor sticker that says 48cc ;-}
SickBikes is out of Xpipes right now, so that may slow down your plans.
But back to quieting the exhaust...
I can't recall what movie I was watching last night, but the guy used a silencer on his pistol.
Now a gun barrel silencer certainly has nothing inside it to hinder the bullet travel like mesh.
This might give you guys some ideas.
How to Make a Silencer
If I had the time, tools and material I'd play with the basics but have none of those at the moment, but it is an idea to toss around.
Baffle the sound by bouncing it around in a double cylinder to cancel itself out and dissipate it through more holes.