Where is the oil?

• If there is oil forward of the carb, you're leaking through the bearings. The needle setting isn't going to matter since you're sucking air through the bearings every time the piston rises toward the head button. Conversely, every time the piston goes down, fuel is pushed through the bearings, pushing out metal dust with it. The way the engine is supposed to work is piston up, sucks in air and fuel through carb while piston down forces fuel and air though the passages and into the combustion chamber. I'd bet that you're not getting enough fuel due to a worn/leaking bearing. To find out, take your spinner and try to move it(and the crank shaft) sideways. If it moves at all, bearings are shot
• If it's around the head or rear of the cylinder, it's probably leaking between the engine and the exhaust. If that's the case, you're not getting as much tank pressure as you think and the engine is starving.

One other thing. Your engine uses an air bleed carb. If you're not used to setting one, it can cause you problems as well since it works differently than a high and low speed needle carb.
Something else just got me thinking. You are mixing in straight castor oil. Are you filtering it or just dumping it in? I'd remove the needle valve and see if it's gummed up with castor fibers