You have to big of a prop with a 12x8 LOL try the 12.5x3.75 wide prop but is a heavy prop. also to hover a plane or do 3D stuff the plane needs to be light and have a light wing loading. get rid of that 14 ouncs tank for starters.
Do you have a big exit hole for the air to leave the cowl? i also bet that since you are over proped you are trying to get every bit of rpm out of the engine and it goes lean during your hover and loses power.
also if havent yet remove the baffle in the muffler.

try a 12x4 or 13x4 prop also.

for most planes in this size range a four stroke engine is best.