Ok, here are my thoughts:
- 68 HP ~= 50.7 kW
- If you're going to use the engine for heat you have two sources:
- Engine coolant - used for regulating the engine temperature
- Exhaust - plenty of heat, may consider an air-water heat exchanger
- For the engine coolant you need three things to consider:
- The engine is not yet at operating temperature, coolant is circulated until it reaches an operating temperature
- The engine is at operating temperature, cooling capacity is sustained by heating house water - water / water heat exchanger.
- The engine is at operating temperature and the house heating needs are not capable of cooling the engine - use something like a bypass through an external radiator / fan
On the generation side - you need to decide between using 12VDC or 120VAC. Obviously one is easier for charging a battery array (think of it as a crude power smoothing), and then if you're not running things off of DC, use an inverter - there are various sizes for renewable applications, however, the larger inverter you want, the more it can cost.
For AC, you can run a synchronous generator at...well...its synchronous speed (with a 1:1 transmission ratio):
here.
For a 2 pole generator - this is 3600RPM for the 60Hz power in the US (4 would be a reasonable 1800RPM). With that said, if you wish to tie into the grid, you need to make sure that your sinusoidal voltage fluctation is consistent (synched) with the grid - not fun. Synchronous wind turbines have interesting starting procedures because of this.
What kind of duty cycle would you operate the engine at? Would you size the generator for peak load, or for continuous operation?