Yes, you can narrow the sides to reduce weight without affecting tiller. Just be careful to remove the same amount of material from each edge.
I think 1 1/8 is a good width though. How much weight do you want to lose yet? If you get too narrow, you'll begin to lose lateral stability, and since I like my bows with a fully radiused belly anyways, I would leave it 1 1/8" wide and add in the necessary facets on the belly, and round it over through the course of tillering and nearing target weight. Expecting to lose several pounds or more, depending on how deeply it's rounded.
I've never made an ipe bow, but from what I hear of its strengths, it should easily handle a radiused belly.
You should aim to have all trap facets and belly facets established, and have a good tiller at target weight about 4-5" short of full draw. Then when you round over what's left of the belly facets, sand the whole bow, make any final minute tiller corrections in the last inch or two of draw, you should be able to hit weight.