Yeah, the shape of the teeth from a normal steel pinion and a hardened steel spur are different and bind quite a bit. You can even tell that by trying to spin the pinion on the spur by hard. The binding was probably what made it go slower and is definitely where the filings came from!

I'm not really sure what tooth pinion you'd need. I would use this page to figure out what pinion you need. First, enter all the values from a stock emaxx except leave the top speed blank. Write down the top speed and overall gear ratio. Then, clear the form and enter the total gear ratio and top speed calculated from before and the rest of the values, but leave the pinion blank this time. The calculator will figure out the pinion to use to get the same overall gear ratio and top speed.

Oh, okay cool. I was dead on, i had 45mph for a 14 T, and 52mph for a 16 T pinion.

I haven't experienced any performance difference between 32P and Mod1. As long as you use a metal pinion and plastic spur, you should be good.
Its more a matter of finding the appropriate setup that will accomodate the gear ratio you need. Its really up to you which route you take. I made the switch to Mod1 because I wanted to use the Revo slipper so I invested in some Mod1 pinions (They didn't have the tmaxx .8 metric spurs at the time). I then needed a larger spur so I got the Strobe slipper from Mike and used the 51T Mod1 spur.
The price between the two types of the gears are practically the same. I would recommend choosing the pitch that gives you the most options for now and future use. If you think your future applications will never use Mod1, then 32P should be fine. If you ever see yourself doing any 1/8th scale conversions or using 1/8th scale center diffs, go with Mod1.

When you start using a 10T mod 1 pinion, the problems will rise, the gear is simple too small to make a good contact with the spur.

For your project, i would personally get a centerdiff instead of a sollid axle, this takes away a huge amount of stress from the drivetrain, and they can be bought on ebay for 25 bucks. 5 bucks for a mod1 51t spur and you'll be fine.

...I use a 66t 32p on the hellfire center diff...The spur is from the E-savage so its 'essentially' the same as an E-Maxx...Its goes fine, no problems, but i will be changing back to a Mod. 1 Kyosho spur...Just makes sense (to me) to go with 'chunkier' teeth...