An interesting project, I initially thought it was a street mod of some kind.
If you keep the stock fork Racetech can make it behave, for dollars of course.
RT - Digital Product Search
The engine can be made a little more powerful fairly cheaply, mix and match of mostly Honda parts, you will need a different ICM I recommend the Ignitech TCIP4.
With a change to the NT650 valve springs and cams, on the street I reliably...so far, spin the stock bottom end and pistons to 7500 rpm, I have the limiter set to 8000, it is willing to keep pulling, but the stock limit is 6100 on the ACE, so bear that in mind. NT650 aftermarket cams and valve train will fit, pistons will not.
If you blow it up you are better to grab another engine from the wreckers than try to fix it (It is a selective assembly bottom end}, 1998 to 2003 ACE and 2001 to 2007 Spirit (chain drive) will bolt right in and are plentiful, just swap the good stuff over.
PB Sprockets has a 16 tooth front sprocket with the stock offset (Stock is 17), front sprockets for the 750 Africa Twin are available to 15 teeth, fits the spline, but the offset is different.
Rear sprocket is available to 47 teeth.
I think with the heavy crank and flywheel, it just might put down good usable power on the dirt.
Please keep us updated on the project, a few folks here will be interested.