By going from a 6" 3" race muffler to a 2 1/2" exhaust system ( prob have a 12" of 3" pipe than reduced to 2 1/2" maybe 18-20" into just a "street car" muffler, no tail pipe) how much power will it kill? Car is currently going 10.9's. By installing a cut out in the 3" portion to open up later will the car perform the same as it did without the exhaust system (other than have the extra weight of the exhaust system)

I have a 3" system with 3" electric cut outs on
my Rampage.. you will still have a drop in power
but I cant say how much that is.. so with a 2 1/2"
you will have a bit more drop in power over the 3"

If I install the cutout in the 3" portion and use a 3" cutout, will it still hurt performance a little bit just from the fact that from the cut out back would be 2 1/2"?

Your MAIN concern is your mufflers.. you can find
some mufflers that have very little back pressure
..if you get that right you wont even really need
the cut outs.. I dont know if you are concerned
with noise but some muffs have great noise control
and low back pressure... do 2 tests on every set
of muffs you try.. a DB reading(noise) and a back
pressure reading.. that tells you how well they flow

What kind of muffler are you using?

A lot will also depend on how muffler friendly the cam is.

30+ years ago I had a Racer Brown STX-19 ground on a 105lsa($20 garage sale find, brand new, ground in 1972)....... ran awesome with open headers....... installed 2-1/2” pipes and turbo mufflers........ and with the same idle speed setting I had been running with the open headers, when you let off the gas the motor died like you shut the key off.
Turned the idle screw way in to keep it running and took it for a drive.
Absolutely awful........ now power, horrible throttle response, appalling gas mileage.
After a couple of weeks I swapped it out for a much smaller Crower solid on a 110, which was a tenth slower at the track(both cams run with open headers), but the motor ran beautifully with the small cam and closed exhaust.

I had a 1969 Dart GTS with a bracket 440 motor that ran 12.23 at 109.6 MPH with a 2.5 inch head pipe out of a set of Hooker 2.0 primary pipe with a 3.5 inch collectors into a set of 2.5 inch old turbo muffs and then into around 40 inches of 2.5 inch pipes exiting in front of the rear tires. I remove the system and the car went 11.39 ET at 117.8 MPH on the next run
My Duster had a 3.0 inch system on it with the same headers going to the rear of the car into a old Magnaflow 14x7x 3.0 in and out muffs mounted at the rear bumper, that car picked up .02 ET and .2 MPH by removing that system in the 1/8 mile
My message is don't go that small if you don't want a bunch of power loss