Also, was there a tiny O-ring on the fuel tank trumpet right where it goes into the backplate?,,,there seems to be a small channel in this trumpet.
Yes there should be a small black O-ring style gasket there-and without it you will get exactly the symptoms you describe-running on prime but won't continue running. [because the O-ring is there to seal the joint-without it you will have no- or minimal suction!] I would expect the correct needle setting to be around the 4-5 turns open for starting (it's a very fine thread remember) and running about 3-3 1/2 turns open
You can get the O-rings from Cox Int'l-they're the same as those used in the tanked 049 reed valved models (you may have to buy a complete overhaul kit-I'm not sure if they sell them individually......packets of 10?) Some people make their own by slicing thin pieces off silicone fuel tubing-but this is a fairly hit and miss way of doing it-and a degree of precision is required. Also it would pay to check the needle tip closely-preferably against another one known to be 'good'-it is possible to break the extreme tip off these needles if they are overtightened when fully home-and that does nothing for the function! [look at it under a decent magnifying glass]