Slight rust on the flywheel won't affect anything. You have a 7 year old motor with an adjustable carb main jet ??

Even though you cleaned your carb, I still think there's something inside. A couple tanks of Sea Foam and you might not have that problem anymore.

The main jet starts out at 1 1/2 turns, but your idle air screw should be about the same.

Try this. Put the idle air screw at 1 1/2 turns. If it won't idle, there's dirt somewhere. If you can get it to run at high speed, back out the main jet until the engine just starts to lose RPM. Then turn it back in until the same. Adjust somewhere in the middle and favoring the rich side.

If you can get it to idle, go from slow to high speed suddenly. If it stumbles, increase or decrease the idle air screw until there is a smooth transition from idle to high speed with a sudden throttle, like gunning your car engine.

It wouldn't hurt to do a compression test or leakdown test on your motor to see if the internals are OK.

As you already know, it's running rich. I think you have to replace that coil/plug wire or at least put a new terminal on it. You're losing spark there. I agree to try a solvent in the fuel and oil. At first, use some auto fuel injector cleaner in the gas, no more than an ounce on a full tank. Add two ounces of Marvel Mystery Oil to the oil in case you have a sticky valve or rings. Later switch to Sta-Bil Marine Formula in the gas - put it in the gas can every time you fill it.

baymee, thanks for your reply. The carb does not have an adjustable main jet. It is just a brass piece that screws in snug with a hole in it. I did find a piece of dirt in the main jet and cleared it out. I was hoping that fixed the problem but it didn't. I will try the seafoam. I always wanted to try that stuff anyway. Heard good things. I will try adjusting the idle air screw. I am a rookie at this adjustment but I have seen people do it. You basically have to find the sweet spot between lean and rich (slightly favoring rich side). Turning it in CW is leaner? Correct? Also I have a compression tester. I will check out the compression. This engine has OHV with compression release for easier starting. Won't this make a difference in the compression reading? I've heard of a leak down test. Do I need special equipment for this?

Saxman1, thanks for your reply. I will definitely fix the spark plug terminal. Also, I checked out the websites for Sta-bil, Seafoam, and Marvel Mystery Oil. They all appear to be stabilizers. Seafoam claims to do it all: clean, lubricate, control moisture, and stabilize. Website says it can be added to intake and crankcase. Any particular reason you prefer using marvel mystery oil vs seaform in the oil? Also, what are the benefits of marine stabil vs regular stabil?

Ok, I fixed the spark plug terminal and put seafoam in the oil, gas, and into the carb. The smoking got better initially, but now it's back. It does idle better though.

Marine Sta-bil is more concentrated than the red, and is designed to prevent corrosion in fuel systems related to alcohol-mixed fuels. It also has more cleaners than the red. I like MMO because it actually is oil with solvents added. Seafoam doesn't strike me as an oil, but even kerosene can be considered a 'lubricant' under certain conditions. Definitely nothing wrong with Seafoam - just a preference of mine. I did not find reference to MMO being a fuel stabilizer and would not recommend it be used as such. I use it along with a stabilizer.

UPDATE:

The smoke appears to be GRAY in color (not black as I originally thought), and it uses a few ounces of oil in an hour and a half of mowing. The spark plug has carbon AND oil residue on it. I'm thinking head gasket at this point.

So far I have checked:
- compression 120 - 130psi (3 - 5 cranks) Is this good?
- valve guides seem ok; the valves do not bottom out when turning engine; each valve moves about 3/8 - 7/16"
- rocker studs tight
- pulled out both push rods; they are both straight
- readjusted both valve clearances for .005in
- when cranking over engine (valve cover off & spark plug out), oil spews out from around the the lower pushrod area
- checked the reed in the oil breather; it is clean and not cracked or chipped; seems to be working properly

UPDATE:

The smoke appears to be GRAY in color (not black as I originally thought), and it uses a few ounces of oil in an hour and a half of mowing. The spark plug has carbon AND oil residue on it. Walt said it sounds like a head gasket.

So far I have checked:
- compression 120 - 130psi (3 - 5 cranks) Is this good?
- valve guides seem ok; the valves do not bottom out when turning engine; each valve moves about 3/8 - 7/16"
- rocker studs tight
- pulled out both push rods; they are both straight
- readjusted both valve clearances for .005in
- when cranking over engine (valve cover off & spark plug out), oil spews out from around the the lower pushrod area
- checked the reed in the oil breather; it is clean and not cracked or chipped; seems to be working properly

A leakdown test would be helpful. Google it. Compression is good, so maybe a bad breather???