Pre 1970 H35 and smaller were steel sleeved blocks, they ended that in 1970 from what I have seen and even only the offered the standard bore blocks as replacements after that shown in the parts listings.
Non of the HS40 or 50's were offered with steel sleeves. Never noticed anyone saying they have done it, I have seen people mentioning though that punching out and HS40 block too far and you can get into a mount lug hole for the air deflector on the side.
The ball bearing sidecover of course would be a little less friction. I think it retains the crank better as well, somewhat keeping the crank from pounding on the case and letting the bearing take the beating on the side load. The earliest engines that The small frames are based on (Lauson's last designed engine before Tec bought them) did have a needle bearing on the mag side, but they were a full on oil pump system engine and Tecumseh dropped all that in the early 60's. I could not tell you how it would do or if it would starve on the splash system or not. I think they were also only on small journal cranks (might not have enough room on an HS as it has larger journal on the mag side as does some of the later H engines. Looking at old magazine articles with snipets of "performance info" from the early 70's when they were pushing the limits of these I never see any mention of it being done.
no clue on crank mods
I would think you may be able to punch out the H35 and I would be interested to know myself. The first HS40 in the late 60's actually used the H35 head with the smaller bolt pattern Was pretty thin around the head bolts though, This shot shows the bolt pattern difference and gives and idea of spacing (H35/early HS40 head gasket on a 1970 block)
I thought I had a shot of the 1969 HS I have looking down the bore but I don't, Its the engine on the bottom of that pic.
The H engines are smaller/thinner around the cylinder too so punching it out might get it real thin on the outer walls.
If it can be punched out that would be great though, the later engines, in about 1984, started to use the HS cranks and rods in some of the H engines. So the bottom end is HS40 but spinning a smaller piston and a cam 180 degrees out. One problem though is the front wall of the H engines do not have the spacing to clear a typical Billet rod like the HS engines do.
I would think that the next weak link might fall on the crank after rod and flywheel :shrug: