Chicago,
The sportwerks and mach motors tend to run a little hotter than some of the other engines out there. By the way, what fuel are you using? Nitro % and oil %?
I run Trinity Horsepower 30% nitor with 12% oil. I beleive this is the best power and oil combination.
When I break in an engine I never leave it idling and make sure I get up to 200 degrees as soon as possible but try to keep temp below 240 range. Run at 200 temp for about 2 to 3 minutes making lazy figure 8s and don't full throttle yet. Do this in 2 minutes cool down and make sure the piston is at bottom of stroke out of the sleeve pinch. Then run next tank about 5 minutes and cool down, restart until out of fuel. You should be good to go.
By the way, I believe your low speed needle is way to lean and needs to fatten out some.
Rockman