Oh, I had a similar problem once, and I turned the needles all the way in, (lean) and then brought them both out 1/4 turn at a time, trying with a heavy duty starter between adjustments. I was used to glow engines, and the symptoms I was seeing made me think it was too lean; however, gas engines act somewhat differently and won't even pop if they're too rich sometimes. So, before sending it back, you could try that. If it ran great during the initial run, I'm wondering if you were breaing it in correctly. Gas engines should NOT be run rich during the break-in, it will damage them. Also, too much prop during break-in can kill them too.

Hey, if all that has already been mentioned, my apologies... I'm guilty of not reading the original post about the engine problem, just some of the follow-ups since then...