Welcome Ken. Glad you found us.
An 80 hp model 2 is doable. SkySteve did a model 1 with 80 hp. Makes a good performer too.
Hopefully he can shed some light on the process. He made mods to rudder and vertical stabilizer for better handling characteristics before final covering also that worked out very well.

Recovering can be done with your choice of multiple fabric systems today that work on the Kitfox. The most common is the PolyFiber system which is the most likely fabric system found on aircraft from the early days and models like you are looking at.

Stewart’s system is another complete fabric covering option. Similar to the PolyFiber system but without the toxic chemicals found in PolyFiber products. Covering can even be done in doors without the use of respirators.

The third system is called Oratex. It also is a non-toxic system with no painting with exception of your fiberglass cowling pieces, metal fairings, fiberglass wingtips ect. Oratex is pretty popular system now.

All systems have their own specific application techniques so do your homework and chose the one that fits your fancy.
Best of luck with your project.