To clean up the mouldboard of the plough I would try to use an abrasive flap disc fitted to an angle grinder or failing that a flap wheel in an electric drill. An angle grinder with a grinding disc fitted would be too fierce and would remove the metal rather than just the corrosion. Which ever method you use please wear some eye protection and a nuisance dust mask this will protect your eyes and help you to breath clean air during the rust removal process.
Re the suitability of the replacement engine I guess the proof of the pudding is in the eating!! You won’t know until you try it.

I quite agree a few hours ploughing will clean it up really well, especially if the soil is dry and stony but if it is wet and claggy some pre cleaning will make all the difference to how the the soil turns over.
Definitely follow Wristpins advice re greasing the shiny bits after use though.

Always better to have a machine up and running than sat in a corner with no engine. You can always convert to correct engine at a later date if you want/find one. 8hp should be enough, the SIMAR 56 is an 8hp 2 stroke and pulls a similar sized plough, (might even be a bit bigger). I remember a group of us discussing the subject of cleaning up ploughs and someone suggested finding a suitable beach, the only problem would be the salt rusting the plough very quickly after work finished.

I guess one of the reasons these old units worked well on relatively low HP is the torque of the engine rather than its outright HP.
The 3HP B&S engine on my Wizard is only 125cc, the Villiers MK25 is also 3HP but, is 256cc. It would therefore follow that the Villiers is likely to be a more torquey engine. That and low gearing enabled them to use relatively low HP engines.