I am also converting a LSP to brushless, and I ended up getting a 8XL to go with a MM controller. It was a compromise buy, since I have heard that the 7XL gets too hot and the 9XL and up motors aren't fast enough unless you put more cells on them (5S lipo or 14+ Nimh).
Do a search on LSP on this forumm and you can look through a few other build-ups. Also, look at the speed calculator in BrianG's signature to see what you need for the speed you want.
Balancing taps are used to make sure that each cell in the lipo pack have balanced volts. Each lipo pack is wired for balancing taps or may have them, and you may have to get an adapter to use them on the balancer of your choice.
I am putting 4S on my LSP and I have been looking at trakpower 4900 batteries as well as maxamps 8000 (same price, different performance). I would do a search on these battery names on this forum to see what everyonw has to say about them.
I know I had all these same questions, but thats what makes it an interesting and worthwhile hobby.