Add a head gasket or two.
If the plug is too long an extra head gasket or a spark plug washer would fix it, but as mentioned it should be hard to get the motor to turn over when engaged.
Another thing you mentioned is the sudden lack of any exhaust, that could well be a plugged exhaust pipe from running way too much 2-stroke oil to gas mix, ever hear of the old 'potato in the tail pipe' trick?
Take the tailpipe off and try starting it without one.
A handy 'tool' to have is a spray can of 'engine starter fluid'.
Take off the air cleaner, open the choke and throttle and spray some right into the carb throat and then IMMEDIATELY try to start it. That stuff evaporate in a hurry so don't dilly dally.
If she fires, runs for a few seconds and dies you have fuel issues.
FUEL TIP:
Though you could probably get one of these motors to run on Kerosene or even diesel fuel for a ways if you had to, don't start out that way.
I like to eliminate fuel as
ever being the cause of a problem by simply using premium gas and good 2-stroke oil mixed 25:1 for a new motor, 32:1 once broken in, and I make double sure I keep it clean, fresh and free of debris.
Going back a page in this topic....
One other note about 'Brand Name' motors, when I talk about Grubee's I don't mean any Grubee, I mean specifically the Skyhawk motors not those startfire and other models they quit making back in 2010 as that has been my experience is all.
Like fuel, on a new build I just want to minimize the chance of some given part not performing as expected due to initial defect even if I am seemingly 'throwing money away'.
I'd say 95% of my builds have started right up and run, and when one didn't it wasn't because it was missing frigg'n crank bearings or something like that, and it wasn't because of something as silly as crap gas ya know?
A new builder will inevitably have a problem and have to trouble shoot it.
I just recommend you at least always be thinking about what usually can be a problem as you build it and checking it as you go.
You will have a much better chance your build will fire right up, but if not you will still have a huge head start on your troubleshooting the likely problem.
In short, an extra $20 and an hour checking things as build can save you days of frustration ;-}