Two comments from the peanut gallery...
If the belt is OK other than the hairy edge, I would get out the propane torch and while the motor is on idle, I would singe the hairs off with the torch being careful to not burn the belt material itself. I've done this before and had no issues.
But if those are cracks in the back side of the flat belt, change it out now and move on.
As far as the gear drive goes, I was going to say the same thing about the axial load, but even with straight cut gears running oil, there would be some parasitic drag due to the oil bath and gears. That's why they put windage trays and dry sumps in race motors.
I personally think that straight cut gears on the motor would be way too noisy and would be a constant distraction from the fun of driving the M3W. Guys on small block Chevys take out the timing chains and convert to the gear cam drives mainly to make them sound like a big blower mounted up front. Yes there is probably a tenth of a hp to be gained by gears over the timing chain in the SBC, but it's about the noise. Believe me with just four gears it's way loud.
In the M3W there would be a few more than just four gears.
Again just an outsider's opinion.
