For the flywheel, I think just a mild steel should do, if the geometry of the flywheel is not a large diameter. The inertia dyno I used years back (from a boater who made it in his machine shop) had a flywheel mass that kept the rotation acceleration slow enough to collect data for a engine of about 7hp (you pick the HP in the formula, to figure out the inertia you need for the flywheel to control it. You can make a "stackable flywheeel" also, so you can adjust the inertia, and report it to your software). I do not have measurements for the flywheel I used (direct drive--no speed reduction belt/gear mechanism), but it was about 6" in diameter x 6" in length. The length is long and the diameter is small, because a large diameter skinney flywheel may just come apart at 20,000 RPM. I would bolt on a nice tight, heavy duty gaurd around the flyweel, in case it comes apart or comes off the shaft totally (like a broken shaft--not very possible IMO, but just in case)
Shoot me a call Misty. I have some "performance trendz" software and data collection hardware that will work very well with a direct drive intertia dyno, and I can share with you the design of the dyno I used also. It can fit in the front seat of your car---so you can even easily take it to the races---to see if that Zen piston port cylinder is really making over 7hp---with accurate flywheel inertia calculations and construction.
The inertia dyno is as accurate as your flywheel calculations, pretty much. The simple physics and construction of the flywheel can make the dyno accurate and repeatable. You can use a weather station, or hand input the air quality before each run with a cheaper hand held devise. My weather station cost $500.00 (ouch), and you can use a EGT gauge in the header section of the pipe to assist with jetting. I love my water brake dyno, but I don't think it is 10 times better than the cost of a inertia dyno. The inertia dyno I used---seemed to give me very good numbers also.
Congratulations with "endurance offshore championship" using one of my reed case engine builds. I bet no other reed case engines were there either. That is the way I like it. One engine--one championship.

We have won races, but not a Chamionship over here so far. Thanks for helping ESP win their first boat Championship. I could not have done it without you and some effort on your part.
Doug @ ESP
(616) 458-8103 (EST Zone)