It could be that the low end is too rich and the high end too lean or vice versa. Going from one to the other in a quick transition can cause all kinds of silly engine runs, and if you aren't looking for it, can give you headaches.

It does sound like you are too lean though. Even though you think it was set correctly, try setting it where you "know" it's well on the rich side. I often set student's engines really rich just so I don't have to think about it, or worry that it will be on the lean side in the air. It's rare that a trainer needs peak RPM anyway, so why bother with the headaches. I'd suggest backing out at least a half turn from where the needle is right now, ie a half turn from where you think it's peaked.