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Suggest you keep it stock.
If the handling is bad, please have the chassis and forks checked. The CBZ is one of the best handling city bikes!
Go with the stock air filter (unless you want to experiment).
If the engine is rough, it might be due for an overhaul. You could be looking at replacing the piston/head, cam chain etc, and the clutch plates. Again, you need to get it checked by a good mechanic or at an authorised service station.
Good luck.
Also suggest asking these questions in the CBZ ownership thread, and also go through it so you will have a fair idea of what can be done with your bike.

Firstly, put a small 16" mag wheel for the bike, next change the current spoke wheels to mag wheels, (go for three or two), get it painted with some good paint which everyone should look at your bike, for the rear wheel, put a wider tyre and remove off stock mudguard and just alter it and put only the number plate and indicators, for the tyres also put a tyre hugger which will look more trendy and for the handlebars, put a clip-on handlebar for a sporty ride and finally for the filters, install a K&N filter and remove the current exhaust and put a sports exhaust which will make the bike trendier and catches everyone's eyes on your bike. . .

(PS: This is what I always wanted to do if I get an old CBZ, so you can try this out) Performance and exterior looks will be excellent but I can't guarantee you a good mileage. . .

just put a ZMA engine and you will smoke the other bikes except few though

Hmm I suggest keep it stock.
Engine needs overhaul.
Though if u really want mods first go for mag wheels.
Later check on K&N filters or cold air intakes......ff exhausts..LED rear tail lights.....though dont fiddle with handling members of the bike....CBZ is one of the good handling bikes.
Cheers

Re: Modification Help needed for 2001 CBZ

Hi,

I am customizing my Hero Honda CBZ Classic as a brat style. I wanted to share experience, design details , cost details etc.