O.K. so I set the needle back to manuf. recommended setting(1 1/2 turns). Still using previous A3 glow plug and 15% fuel. Start it up, work the trottle, and all seems fine, so I go to WOT and begin adjusting the needle, two clicks lean, and the RPM's drop, two clicks rich(at previous setting, and no change, two more clicks rich, and nothing. I go to half throttle and it dies. this time the engine was smoking hot, literally. It was smoking. I let it cool down, it still seems to have good compression when I flip the prop.
I took the head off, and this is what it looks like. Is this bad, do I need to change something here or what??????

I did notice that at the remote needle valve, it looked like the carb was trying to suck a bubble out of the needle valve, but it wouldn't break loose. That's the best way I can describe it.