Waspy, this is what bothers me: You demonstrate a fundamental misunderstanding about simple engine balancing, then proceed to try to tell us that not only should we disregard linear momentum but that physics has been wrong for years about conservation of energy. Much to my annoyance i am no longer involved in engine design/simulation/development, but if project delivery was at stake i would beat a path to well understood principles of mechanics - every time.
http://ocw.mit.edu/OcwWeb/Physics/8-...ures/index.htm
This Walter Lewin lecture series on mechanics is well worth watching - if only for the great entertainment value. Please review these, since it will help you gain the grounding you need to discuss such concepts.