The engine is a 25-size maximum. Yes, you can use a smaller engine. I will be testing very old ST 23 this spring.
No, you cannot use a 35 on this event, but you CAN use a 35 in six other events that come to mind.
I set the size at 25 because there are a lot of good throttled 25's on the market and this nicely fills a gap between 15 & 36.