You could definitely put that engine in a small ultralight. How reliable it would be is a different matter. Rotax got into the aircraft game because in the 80's when ultralights we're still a new thing people were using whatever they could get their hands on. From go kart motors to largechsinsaw engines. Rotax made two strokes for snow mobiles etc which turned out to be a good match.
People often say 'that motors not very powerful, my car engine would be much better'. But there are several really important differences that make car engines not as useful as it would first seem. First of all, propellers are most efficient at around 2500 rpm. So a lot of plane engines are designed to develop power around that speed. Rotax design their engines more like a car engine, and then add a reduction gearbox, roughly 2:1. Propellers might be more efficient around 2500 rpm, but it turns out petrol engines are most efficient around 5000rpm.
The other major thing a car engine spends most of its time at a fairly low power setting. To drive on the highway might take 20 per cent of its power for instance. But an airplane might be cruising at maybe 75-85 per cent power, ALL DAY. Not just that, on smaller aircraft especially, on take off you are using 100 per cent power until you level out. That could be five minutes. Imagine a drag race that was five minutes long!
To illustrate how seemingly under rated an aircraft motor seems, I learnt to fly in a Piper Warrior. I think from memory it had a Lycoming 0320 in it. That's pretty close in capacity to a Chevy 327. But the Lycoming only developed 150hp, AND only 4 cylinders! Like I say though, it could run all day near the top of its range.