The only thing you're out of line on is spending 40 large on a motor...
Seriously Mario, you make a few good points. Today's economy has seen a huge erosion in vendor/customer relationships and it's the customer who usually pays. Today's mantra is trust no one and the bigger the deal, the more protections that are built into the agreement.
Having said that, you cannot universally translate transactional Ts & Cs from one industry to the next. It may work in some instances and not in others. A great example - all respect Chad - is dis-incentives. In my business we will not construct nor agree to any contract that gives the customer a right not to pay us. It's hard enough to get our customers to honor our invoices in a timely manner even when all goes perfect. We deal in IP though, not hard goods.
Most custom motor builders are small businesses. They do not have this level of product nor bulk inventory sitting on the shelf waiting for you to come along, so they'll want to be reimbursed for the parts invested. They aren't banks nor made of cash so that would be a reasonable request of them. Then there's the time involved to produce your motor so it will live. That takes care and talent. Some may agree to this payment schedule, some may not. He has to put food on the table as well.
Do you lose out on having your motor built by 'THE GUY' because he won't take your payment terms?
I've had great experiences with custom motors being built in terms of final product. Never was one (out of four) ever delivered on time. What happens if under your agreement, you release progress payments and then the build stalls? He's got the parts $$$ (1/2 or more of the total?) and the balance is sitting in an account waiting for him to finish, which he doesn't do as agreed and your frustration level rises. What if the parts suppliers don't deliver those custom parts (pistons - happens all the time!)? Is that his issue? Using another example we see here all the time - what happens when the parts are stalled, you're not paying the bulk until he finishes and another consistent paying job walks in just like the body shop industry (not you Mario, but you know what I mean). Lots to think about.
In your shoes, I'd pick the builder carefully (not Beck or Nelson) and present the idea of an agreement. See how it goes over and how you two can come to terms that each party can live with. Don't make it so restrictive that if some thing comes up the builder decides not to complete or work on it in a timely manner. Lastly, be prepared for delays. Hate to say it, but it is reality in the custom motor game at the level you're playing at.