I was thinking about cutting the rear pipe along the red line just behind the passenger peg. Will doing so cause any negative performance issues or cause harm to the engine?

 

Those look like drag pipes so no......you wont notice a difference.

 

They also look like slash-cuts, so the likelyhood is your fuelling is all over the place already. Shortening either or both pipes is likely to mess that up further. Not a good idea IMHO! Exhaust design is a quite complex business and a hacksaw doesn't exactly represent the cutting edge......

 

Alright. What needs to be done to tune it? does something need to be adjusted on the carb? will i need a special calibrating tool?

 

You cant tune short or drag pipes very well. You can tune them so theyre not so bad but you can never get em good.