Hi
1 Total budget for mods?
2 Skills and other tools you have, welder, lathe, mill/drill?
3 What Model, newer 2 wheel or older 3 wheel 2x42 (137.215280)?
It is quite easy to fit a new motor to the older model. I fitted a 1725RPM 1.5hp baldor. I used a screwed motor arbor adapter to get the drive wheel mated to the shaft and give sufficient extension to get through the casing. I used mdf board as the base and a wood block to raise the motor the appropriate. Motor $50 (used), arbor adapter 5/8 to 1/2 threaded $7 and wood offcuts free from a carpenter friend. See a picture here
http://sites.google.com/site/alexnharvey/home/knifemaking/craftsman-2x42-grinder and a knife I made on it elsewhere on my site.
If you could find a motor with a 1/2" shaft and keyway you could skip the adaptor. You will need a motor with a shaft around 3-4" long I think if you go this way.
If you have the older type I would advise getting a thick section of angle iron cut to 2" wide, and use this as the platen instead of the stock part. You can also fit tile or pyroceramic to the face.
Future mods, I have considered increasing belt length in two ways.
1. Moving motor back, cutting slots in casing to allow belt to reach to the new drive wheel position.
2. Adding a tool shaft receiver tube, a square 1.5 id tube is mounted to a plate, plate screwed to the current platen mount hole or work table mount hole or both. Positioned to allow tool shaft to pass just above the motor shaft or stop short thereof. Then all kmg type attachments can be mounted. Casing must also be cut a little to allow belt to reach the new contact wheel or platen.
With the newer 2x42 you could fit a new 1725 motor behind the current motor and run 2x72 belts, using the current motor as a ball bearing arbor. Otherwise you need to find a motor that the belt unit can be attached to. I think maybe with a face mount motor and a custom made adaptor plate you could work something out. Other larger slower grinder and buffers units may have the same mounting holes as the craftsman, but I'm not sure if this is a standard drilling, I think it may be.