1. Which engine to get? B&S or Koehler?
Answer: The Kohler Courage is offered in the single and twin cylinder. I have not heard of problems with this engine. The older Kohler Command had a few cases of blown head gaskets. For your price range, the single cylinder Kohler with a 42 inch mower would be a good choice if it is offered.

The Briggs single has had a few cases of blown head gaskets. Sometimes a bent push rod appears. The ELS models have full oil pressuse lubrication with filter as does the Kohler single. The Vtwin Briggs has been more reliable than the single. My Briggs choice would be the Vtwin with the 42 inch deck.

2. Any other brands around my price range that I should look at besides the Craftsman?
Answer: I never liked the lower priced MTD mowers including the Toro model made by MTD. White, Bolins and Troybilt are both MTD brands. These are lighter duty tractors than the other brands in the $1300 price range. I think you are better off with the craftsman in your price range

3. Automatic or manual? My wife wants an automatic. We have never had an automatic. I don't have any hills to climb, just don't know how reliable the automatic ones are and if the repair bill would be more on them.
Answer: Any automatic carries more risk than the manual type. Repair bills would be substantial. Automatics have been reliable however, and with the flat yard, this would probably be fine.

Larryf has a good handle on things. A couple of other points: The Toro XL series is a nice tractor, but I'm sure the desired HXL model with the hydro is 2 big ones plus. Look at the bottom of the Toro web site to see the real Toro riders. The Toro tractors at the HD are definately MTD built. If one isn't familiar with MTD products, you can tell by the style model # and MTD part #s all over the thing - even says MTD on the belt. I don't have a big issue w/ MTD products. They have several 42" deck models. As far as repairs go, the twin belt system on the Pony has a higher # of belt replacements in my world anyways. Cub Cadet (also MTD) is a more solid tractor. Lubable deck spindles a plus. Cutting 2 acres, get the best tractor you can afford. One other point on transaxels. If you get a model that you have to hold your foot on a pedal to propel the unit, your foot may get tired. Very cool for trimming where you have to vary your speed alot. Automatics are usually thought of as hydros, tho the MTD with the multiple speeds "shift on the go" are overall dependable, but certainly operate different that a true hydro. The Sears rider served you well and are certainly worth a look at. Husqevarna is built by the same company that builds the Sears. Best take a test ride and see what's best for you and your lawn.