I'm looking for a 636 (If you can't beat 'em, join 'em) and found an '07 636 with low miles at a decent price. But, I had heard that the '07s are down on power compared to the '05/'06 engines....any truth to that?

07's are 600 cc, not 636. If you found an 07 636, its overbored and illegal. but yes, they are down on power, not really a good choice. 636 or R6 your best bet.

I was told by a dealer, that the output has been relocated & not good for micro

Thanks, I had thought that, but I see so many '07 s advertised as 636s (right off the bike), I thought that there may have been a transition period where they sold both. I'll keep looking for an '05/'06.