Do you see any BLACK smoke in the exhaust stream?
Are the spark plugs showing sooty, black deposits?
It is not unusual to observe gasoline droplets entering the induction air stream when looking into the carb as you describe.
So, what leads you to use the phrase "running rich"?
How does the engine act when you put it under a load (driving while cutting grass)?
Your description about hesitation might simply be due to the governor beginning to act as RPM increases. That is why you need to answer my questions above, then we can continue if there is a genuine problem.

Thanks, Mownie. Yes, plugs are black and sooty, exhaust stream has some black smoke in it, crankcase oil smells of fuel. Under load, when governor actuates, hesitation increases, and fuel stream from main jet is an obvious liquid spray. Leakdown test showed about 15% both jugs through crankcase dipstick. Compression180 psi both cylinders.

"crankcase oil smells of fuel"

That's the key-
Carburetor needle/seat is leaking through.
It's akin to the float in your toilet not shutting off. The excess fluid goes "somewhere".

You might be able to get by as simply as-
Pinch off fuel line.
Remove the carb bowl,
Remove float & needle
Flush fuel line for a couple seconds to flush out any "grit"
Reassemble.
CHANGE oil & filter.

Carb holding 10lbs pressure. Needle undamaged, seat clean and clear. My guess is it's not mixing air up the main jet, just pulling straight gas. Could that be the case?

So-
How did the oil get in the crankcase then?

You still need to do an oil change unless you want a lot of premature wear.

I agree w/ Bill. He said oil but sure he meant gas. I suggest draining the oil cold. If it seems thin then at some point the gas has run from the carb into the cyls and past the rings. If it has too much gas in the oil and you continue to run it I see a new engine in your future. If you're sure of your diagnosis maybe a new carb will fix the problem but I would check float level first on the one you have.
Mike

I plan to change the oil before putting mower to work. I monitor level frequently. When I took possession the crankcase was full of 50/50 oil/gas. Drained and installed filter. Drained tank, flushed lines, checked fuel pump for pulse, checked vacuum line for gas( dry) cleaned carb, checked needle and seat, adjusted float to almost closed, changed #1 cyl head gasket, pulled flywheel checked woodruff key( fine) set magneto clearances, all I have left that I can think of is:1 new carb 2 vacuum leak in intake manifold, or 3 head gasket on #2 cyl. But I'm not a mechanic. Found lots of posts with same problem but no smoking gun or silver bullet. I WISH it was the needle valve. Have I missed anything? Gas odor in oil could be residual, level hasn't risen notably, but smells like fresh gas, not the rank piss that was left in it when I got it.Carbon deposit on valves...would that let unburned fuel into case on compression or exhaust stroke?

Your carb may be holding against 10 PSI at the time you checked it, but with fuel in the gasoline, it has not held fast all the time recently. And even if it is holding against 10 PSI for the brief interval in which you conducted the test, it only takes a leak of a few drops per day to overflow a float bowl and drown an engine with fuel given a week or two, or longer.
The presence of gasoline in the crankcase is indicative of a leak that is occurring when the engine is not running.
Here is why and also how that can make it seem that an engine is being fed too much fuel during operation.
Gasoline is highly volatile and as such it evaporates fairly readily when temperatures are high.
Gasoline that overflows the carb during storage makes its way to the crankcase by leaking past the piston rings.
Once in the crankcase, most of the gasoline will remain in a liquid state.
When you start the engine, and it begins to warm up, the gasoline begins to heat up and vaporize. This evaporation builds a positive pressure inside the crankcase and this pressure vents out the crankcase breather and right into the intake system where it is fed to the engine in the form of a vapor.
This vapor is basically just fuel, with some oil that hitched a ride with it.
This alternative source of fuel replaces a good volume of fresh air that would normally be inhaled by the engine through the air filter because it is easier for the engine to draw in the pressurized fuel vapor from the crankcase breather than is is to draw against the slight resistance that the air filter offers.
Slowly leaking needle valves cause a lot more problems than people realize.
I always recommend that an inline fuel shut off valve be installed between the tank and the carb, and the valve be kept shut off all the time except while you are running the engine.
An engine can't simply be running so rich that it puts liquid gasoline into the crankcase while the engine is running.
If you have fuel in the oil, it got there when the engine was not running.

This post was edited by mownie on Wed, Apr 2, 14 at 10:35

OK, somehow that makes me feel better. I'll install inline fuel shutoff and new carb I guess. Hopefully that gets it, otherwise I'm losing on this deal. Appreciate the input. It's nice to have responses when posting. Thanks guys. I'll put a bow on it and post what steps got me the desired result. Thanks again.

Is the pulse line to the pump wet from fuel? Does this engine have an accelerator pump on the side of the carb>

Pulse line dry. No accelerator pump. I'm convinced the holes in the main jet are clogged and not allowing air to mix with the fuel before entering the throat, making for a rich mixture. Installed in line fuel shutoff and changed oil again. After running for 5 min dipstick smells of gas again. Its gotta be the main jet air holes (ventriole?) that have become clogged. Input on a remedy? The main jet is not adjustable and I believe is pressed into throttle body. Thanks all.

***"Adjusted the float to almost closed"***
What do you mean by that?

Bent tab on float so that needle seats when bowl is not yet full. In an effort to restrict fuel flow. Engine purrs right before starving/dying from lack of fuel. Rich fuel mixture. Carb is off again, working to clear air holes on main jet. That's gotta be it.

How about a spec #

I have a rider doing the same thing as what has been mentioned but it is dumping fuel out the intake side of the carborator. No gas in oil. Serious black smoke and have tried my best to adjust the float level and haven't been able to find a happy medium. Help would be nice.

Marty dumping fuel through the venturi on CV twin is typically the float valve not seating. The floats are mostly not adjustable, but should be checked for saturation. You will need to know that the vent for the bowl is open. Other than that , some had an accelerator pump on the side- 3 small screws in the cover which will cause a rich condition. There are several variations of carbs on these and you will need to toss the model and spec on the googler and look up some parts. Click on the carburetor in the diagram to see the service parts used, or replace the carb complete.

I have drained the oil and replaced the oil filter along with the plugs. I have also adjusted the float to almost closed and the float vent hole is free of debri. Still getting to much full out of the carb and still getting sooty exhaust along with smelling raw gas. Still have to pinch off the fuel line for it to smooth out and run correctly