My OS 120 III is on its second plane and I've run it both sidewise and inverted w/ equally good results.

Bob, pls reread what I wrote above, by opening the air ENTRY hole you are doing the opposite of what I'm suggesting. To improve flow thru a cowl, you can EITHER restrict the air entering OR increase the area in which the air EXITS.

For example, in my 1/4 scale Giles, I help cool the Moki 1.35 (side mounted) by completely closing off the left side air entrance into the cowl. Why? because, the air entering the cowl on the side opposite the engine, is only creating turbulence in the cowl and doing very little, if anything, to cool the engine. By only leaving the right side hole open, all the air entering the cowl is directed (in this case) directly over the cylinder's cooling fins.

Before you risk your plane again, I would suggest pulling the engine and running on a stand where you can more easily adjust it and observe its operation. If it runs well on the stand, then it's obviously something in the setup in the Ryan that's amiss. If it still acts up on the stand, then it's an engine related problem.

Just an idea, but very rarely it does occur that vibration will cause the fuel to foam in the tank and cause the engine to surge and eventually quit. Is there any way to wrap the tank in 1/4 foam rubber in that plane???

I wouldn't hook-up a muffler pressure line on this engine, by the way, because it wasn't designed to run that way, and second guessing the manufacturer is never very smart - it could very well void your warranty. I imagine your engine is less than 2 years old, so, if all else fails, why don't you pack it up and send it back to Hobby Services w/ a detailed note explaining what's going on.