Seriously nice! And yeah, though a front hub would work, a chain drive of some kind would be the way to go with that one, stokemonkey type, or whatever. I assume a fairing is in the futrue for this baby?
On the dropout idea, If just one of the dropouts was welded shut, it wouldn't take that long of a slot to be able to angle the axle enough to drop the other end of the axle out of it's dropout. I like the idea of creating a bolt on bottom piece to the dropout. You could weld a nut to the front and the rear of the dropout, allowing a flat bar piece to be bolted to the dropout, closing the bottom, and strenthening it. I have also wondered about using the cheap steel forks, cutting the bottoms off with the dropout, and somehow attaching them to a good suspension fork in a bolt on arrangement. You couldn't weld steel bolts or nuts to an aluminum fork.