There is some validity to keeping in mind the tank location. You do want the tank in decent proximity to the engine/carb/crankshaft.

But also consider, that the tank "location" only exists for straight-n-level flight. So the engine has to be tolerant of drawing fuel uphill, downhill, and under g-load conditions. Example would be, consider where your clunk location is when climbing out on takeoff at ... say .... 20 deg nose up. Most engines run fine like this.

On my own test stand, the the tank CL ends up mounting about 1/2" below the spraybar in the carb. At full fuel, the fuel level is above the carb, and obviously as fuel runs out, it has to go up hill a bit. At low fuel conditions, that results in about a 1.5" below-carb fuel level. I have not run across an engine that did not run through a full tank.

My point here, the tank position is something to consider, but its probably not causing the surging.

About the raw-fuel dump...

If its obviously spraying raw fuel in the exhaust, and still acting as if it is hot/lean or really sags off ---- it may be overly restricted on the exhaust.

Let me know how the test bench runs go.
Bob

(For reference - an image attached shows the layout of Dub's test bench. Mine is simlar, just a little smaller. Yeah, it is elaborate by most standards, but it has the basic components. You can see here there is no tremendous attention to fuel tank location. Focus is on safety as well as easy setup, measurements and adjustments)