The big problem with violating the LSA limitations is that - as the FAR is written - if you EVER, even ONCE exceed any of the limits, the AW is invalidated and the aircraft is never eligible for an AW again. Pretty draconian. Of course, that's the way they're written. What the FAA is going to do is really yet to be seen.
As others have clarified, the 120KT issue is SL, ISA and max continuous power. There is no limit on weight or CG with respect to the 120KT limit. However, as we know, flying the airplane light and at the aft CG will make it faster. Thus, it is certainly possible to see > 120KT without violating the FARs. I often see > 120KT IAS and TAS in the CT when light and aft CG, and at colder than ISA.
As for building a LSA that isn't an LSA, I'd stick with the 912 and go with a CS or in-flight variable-pitch prop. This gets you full power out of the 912 in climb-out (getting to around 5500 RPM) and allows you to get lower RPM in cruise, lower fuel flows and still plenty of speed (4800-5200 RPM). Several European LSAs have variable-pitch props and, along with negative flaps, get 140KT or more out of the 912. The 914 works well at high DA, but costs a LOT more and is much more complicated. There are lots of 912 CS applications (e.g., DA20-A1 Katana, HK36 motorglider).
TODR