It's amazing how we like to complicate simple things made to do simple jobs.....
How many SS machines are made with lights and hand warmers? To me, the less there is to a machine that will be working in a difficult environment, the better.
It's obvious that the MTD handwarmers I've seen are not useful, and are merely marketing ploys (I havn't tested and can't speak to any other manufacturer's grips).
However the heated seats in my car are excellent. Thet have 5 heat levels, and have been competely reliable going on 7 years now. They are quite enjoyable on a cold winter morning.
It should not be that hard to put reliable, multi-stage heat elements into snowblower grips. If someone does it right, I would certainly consider it as an option and I imagine so would many others.
Regarding the OP's question:
Considering the number of yard items your machine has eaten, and the investment you already have in it; I would choose to install the larger engine, provided the auger and impeller check out OK. Perhaps you could sell the smaller engine to the shop or some small equipment guy.
I got a call today and was told the impellar/auger is fine and nothing is bent either. My plan was to do the swap then sell my motor but the only direct replacement is a shortblock which means I need to remove my head, carb, fuel tank etc which means I probably couldnt sell my motor. Between this and losing my warranty I am going to wait it out, if I get my price I will let it go and buy what I really want if not I will just keep it for now. In a few short years once the warranty is over then I will proceed with the swap.