What you need is a die grinder (either air or electric) and some cutting dies. Look at URLs below to get an idea. The metal cutting dies and what you would used to remove large bits and get the basic shape. Then you would switch to the paper rolls to smooth it out.

Don't cut into a water jacket.

Here is a nice set from Eastwood.
http://www.eastwood.com/8pc-dual-cut...nch-shank.html

They also have a porting kit.
http://www.eastwood.com/engine-porti...html?reltype=2


Some random URLs.
http://www.heavydutystore.com/die-gr...ts-c-1683.html
http://www.sgstool.com/products/burs.asp
http://www.masterwholesale.com/shop/...nder-Bits.html