I'm glad someone finds this interesting. This sport is quite young still and there's lot's of innovation to come.
I built a prototype using a Gixxer 750 but I never finished it. It needed A LOT of work. I wouldn't rule out a sport bike engine though.
I found the KTM 950 to be much easier to modify into a snowbike. The V twin LC8 engine keeps the machine narrow. The KTM 520/525 RFS engines weight around 77 lbs producing about 45hp. The 950 LC8 comes in at 127 with about 95hp. (An R1 weighs about 175 but offers probably about 50hp more than the 950) The thing I have come to like is the low end torque of the big dirt bikes, especially for slow technical maneuvering. This is another reason I think the 950 will be a good choice for me. I really like the air box configuration which encases the carbs. Seems like just the ticket for use in the snow.
The KTM main frame is well suited to mate to a tunnel. Since I'm not concerned about switching this machine back and forth between a motorcycle and a snowbike, this opened up all kinds of options for connecting the tunnel to the frame. I was basically able to eliminate any tunnel sub-frame like most of the commercial kits use.
I ended up finding a "new" Timbersled snowmobile skid on Ebay. I wanted to try an EZ Ryde but the Timbersled was CHEAP and it's tried and true on the snowbikes.
I mounted some temporary pegs to stand on and my machine is mobile now. I'm quite pleased with how it feels so far. Lots of little details to fabricate still.