1. This carb needs a good hot dip and cleaning
2. The needle should be in about the middle pos....groove 3.
3. The needle is full rich right now. Remember this ditty about THE NEEDLE,'raise to richen, lower to lean".
4. I suspect you have a bad mag side crank seal. Did the crank play get checked also. A bad crank bearing will take out a seal right away. The engine should be pressure tested at the intake to see that it is holding pressure.