Newbie Qs: Engines and insurance

Greetings, fellow aviation nuts

I'm an aerospace engineering student at Cal Poly Pomona here in southern
California (what other subject would I possibly have majored in?...). A
friend and I, being the ever ambitious students we are, are considering a
homebuilt project.

I've got some questions though. I've searched through the FARs and looked
elsewhere online, but I'm not finding much about engine options. The r.a.h.
FAQ notes that certified engines need to be equipped and maintained just the
same as in a certified airplane, and says that any non-certified engine is
subject to a 40 hour flight test program vs 25 hours. Beyond that, and
knowing that people do auto conversions, I'm not finding much as to what you
can and can't do. It sounds to me like you can install practically anything.
Get a big enough twisted rubber band, or enough hamsters running on exercise
wheels, and as long as it flies you're allowed to do it. Surely it can't be
that simple - what needs to be done before an engine will be allowed to fly?
What can't you do? Any stories of people designing and building their own
engines? (not that it's an option in our case of course)

One idea we were throwing around is getting an old certified engine and
overhauling it ourselves. We're both mechanically inclined, and he's done
quite a bit of work on engines, and I'm sure there are others we could
recruit on campus. It would be a great learning experience. Since neither of
us is an A&P, we couldn't sign off on it, but it should still be a good
engine. What does the FAA think about this kind of thing? Seems that by now
someone must have tried it.

On a different note, Q317 from the FAQ asks if it's possible to insure a
homebuilt. I hadn't really thought about "if," it always just seemed like a
given to me that you would do it, as for a car. Is insurance difficult to
get, or not commonly obtained for homebuilts, or what? And what kind of
ballpark are you looking at for a single engine, 2 seater, without the
million dollar liability policy? with/without a certified engine? how about
high performance? complex? There are probably still too many variables, I
realize, but some idea would be appreciated.

Sorry for the ridiculously long post. I tend to write a lot when it comes to
things I love...


Cheers, and thanks in advance!

-Tony
Student Pilot
44.9 hours