The S1 has a 4-2-1 exhaust manifold and try to retain the same. Looks for an exhaust pipe of S1 only and retain the sweet roar of S1. Guess your sparkplugs have a coat of soot due the oil getting inside the combustions chamber. Could due to worn out valve stem seals or worn out piston rings. Faulty head gasket would let water mix in oil & you can find oil traces in radiator coolant. Please check both. Since S1 is a simple push rod engine & the engine is also less run, you can your friend can pull down the head and take it to a repair shop and get the seals redone. I think PP head doesn't have a rubber seal. And for changing the piston rings, go for standard size again. With the car jacked up & engine oil drained, remove the head and sump gasket. Unbolt the connecting rod from sump side and pull the piston + connecting from top side. replace the rings and drop them back in the same manner. Do this 1 cylinder after another. Before closing the head leave 2-3 spoons of engine oil inside the cylinder and put things back in place. This is an easy job for you. Using a slip gauge check the ring clearances as recommended by workshop manuals.
What is the tyre size? 175 profile will be hard to steer. Use them for the rear wheels instead.
No idea about the Gypsy carburetor. I think it is a side draught carburetor. Else you may try a Maruti zen carb with an adaptor. Attached are some pictures of my friend's S1 which has Zen carb adapted. He is happy with respect to starting, acceleration, though he hasn't tested top speed. Took him 3 hours to do the swap with all parts available with him. Fuel consumption with bottle turned out like 18kmpl, though I presume 15kmopl to be practical. He didn't go through any jet adjustments or changes. Just used the Zen carb as it is.
