I used a standard sawzall blade when doing mine, no bending, and did contact the inside of the pipe a couple of times. I also found from experience that the blade jumps around a lot less if you're cutting from the bottom up instead of top down.
I wouldn't worry about the inside of the pipe too much as:
1) 99.9% of people are going to look in there.
2) The carbon build up covers most everything in there eventually.
3) It's very easy to touch up the inside of the pipes with high-temp black paint.
If you're not careful, though, the blade can jump and you run the risk of making contact with the outside of the pipes, although I didn't run across that problem. If ya want to be extra extra careful, go ahead and dremel, just know that you're going to go through a few cutting disks. Either way, take your time and you'll do fine. It's trying to rush through things that causes the most problems.
As for power? I noticed a sudden SURGE of power after completing my debaffle!!! (of course, that's the seat of pants perception of power because of the louder rumble in my ears
) I've only heard of one person ever complain about a loss of power, but I doubt that it was due to debaffling, otherwise all those manufacturers who sell straight pipes would go out of business. In reality, I get about the same throttle response and same mileage as before, but MUCH more satisfaction while riding...