The RAF 2000 gyrocopter uses a Subaru engine mounted behind the pilot. They have a good deal of experience with operating this engine in an aviation environment, although it often criticized for being excessively noisy. They claim 130 horsepower for the engine, with a TBO of between 800-1000 hours.
The TBO figures for the Jabiru were aound 1000 hours last time I looked. I have heard comments that the Jabiru engines are a bit light on the claimed horsepower (including Genghis on PPrune).
You're right about the situation with Lycomings/Continentals, they need a heavy does of FADEC, Electronic Ignition and Fuel Injection to bring them into the 21st Century - but I think by the time they get it, there will be no 100LL AVGAS for them to drink. Better going with diesel. The UK has two good diesel engines being developed. See
http://www.wilksch.com and
http://www.dair.co.uk. The Diesel Air unit looks very light of what you are talking about, but the WAM160 may be suitable.
Have a look at the performacne figures for the VANS RV-9 to see what 125HP gets you, before deciding on 260HP.
The German Thielert engine is also worth a look at
http://www.thielert.com/en/index.html .
If your planning to put the engine behind the pilot, will you be going for a pusher configuration?
Any other details available about your plans? Mission, speeds weights, dimensions.