RE: K&B .65 Sportster (yup, more from me)
I know you've just about pulled your hair out on this engine, but I have an idea. In two strokes, I've only run K&B and Fox engines for years now and experimenting with fuel, props and plugs, I've found that the American engines just perform most reliably, overall, on idle bar plugs. Fireball, K&B and Fox idle bar plugs all work well with Fireball and K&B appearing to be ever so slightly better in SOME engines. Don't want to start a plug debate here, but you didn't seem to give any info on the plug your using, but give one of these a try and note any change, hopefully for the good.