I'm not as familiar with Micro rules but most Mini/Lightning rulebooks that I know of have some sort of "one chain, two sprockets, direct from countershaft to rear axle" rule in there.
Dad's idea of it originally being a shaft-drive engine makes sense too, although it still would have been easier to run a u-joint adapter from the Kawi's chain drive countershaft to the ring & pinion, like a Kenyon Midget or a Dwarf/Modlite; maybe it was a case of "make do with what you have".

Jim

Just looked at the pic of the car. The car I was talking about was a 600cc upright w 13" wheels. Looks like that car uses 10" wheels and may be an air cooled motor also. Neat conversation piece but probably not too racy. Too nice to cut up I would call it a keeper.

Honest Dad himself

it does have 10" wheels but is water cooled.

Not sure but I think that used to be Cody Rennels car. He raced it in Charleston, IL. He still races there.