Well then I should give you the good news,

I run the engine today again, with the new fuel mix of 7:1 (14%) with the stock carb. Dialed the needles in very nicely - they are sensitive alright but not hard to tune actually.

With a new sensor holder now the sensor is much closer to the magnet (about 1mm gap) there is virtually no missfire.

1st trial:

I guess I had the timing a little too advanced first (past 30 degrees)
It put out 8550 RPM on JXF 18x6W wood prop.
The idle was consistent if left around 2000 mark.
With 0% nitro glow fuel on glow plug the engine put out about 8600 RPM on this prop.
This concludes the engine is capable of putting out nearly the same power output with gasoline. Very impressive.

2nd trial:

I retarded the timing a little, making it easier to start and hold the idle much better around 1800-1900 rpm.
Top end was reduced to 8400-8450 rpm. Not much of a change for me to consider.
I believe the auto-advance capability of the ignition unit may have advanced the timing at higher rpms. Maybe thats why I didnt lose much rpm.

Verdict with glow carb:

The transition is just fantastic, much like an on/off switch. It howls to reach the peak rpm.
The midrange is quite perfect as well. I can hold it for minutes and it wont change rpm, it wont hesitate to go peak when I advance the throttle.
The idle is fairly consistent around 1800-1900 mark. It may flactuate here and there but will stay in this region without the mixture going rich or lean. It will advance to WOT without hesitation.
The Head temp was around 150-155 degrees Celsius at full throttle after a minute. This was checked with a fairly good quality infrared temp gun.
This indicated the engine doesnt heat up beyond dangerous region when burning gasoline fuel. It may climb a little more if less oil was used.

Problems:

There seems to be only one problem so far: the main needle. It generates air bubbles with higher throttle settings.
It is attached to the original needle valve holder, which is attached to the back plate.
This seems to be a chronic problem with the 160FX, so next time, I will attach the holder to a separate place.
The 14% oil generates a LOT of smoke. - as if a smoke system was installed on the engine. the black out spray on the test stand is much less than the previous test of accidental 25% oil.
But there is still a good amount of oil on the test stand. This may indicate I may use a bit lower oil percentage than 7:1, but since the engine is still in break in period, I will stick with 14% oil for 4 liters of gas.

Wishes:

Unfortunalely I dont have the tools or the knowledge to manufacture an adaptor flange for walbro carb, so I need to buy one ready made.
If I could adapt a walbro carb on this engine, the tuning might get easier and the idle may be more stable.
As a side benefit, the mixture would stay the same through the whole flight as the pump and regulator would take care of it, not to mention I could put the tank closer to the CG.
another wish is to use less oil in the mix as this will make it a little cleaner to run. But at the moment I dont care about the extra oil.

I will continue to put comments on the thread as I go. I will try different props on the engine with time. Also at the moment its running with Bisson pitts muffler.
I have a MVVS 160size tuned pipe (used with MVVS 1.60 gasser) but I dont have the header yet.
In about 2 weeks I will test the system with the full on tuned pipe which ought to raise the performance values a little.

So far this is all I got