RE: Reciever question.
Sir R has it about right. Let me summarize my guess;
1) you have a 35 amp ESC ( 40 surge ). You are running over 40 amps at some points. So you are probably inducing a thermal shut down in the ESC.
2) You say your ESC Max Output Power: 350 watts for the ESC, according to your listing. For your motor Max. Constant Current: 30A
Max. Surge Current: 35A Max. Constant Watts: 333W Max. Surge Watts: 390W. But you are pushing over 40 amps at 11 V, so that would be 440 watts. Again, very possible you are over heating the motor or the ESC.
3) The brake feature of the ESC has no bearing on any of this. The brake only works when you shut the throttle off. It stops the propeller from freespinning. It can not be involved in this issue.
4) You have a 2100 MAH 20C pack. That would max out at 42 amps if you push the pack to the very limit. Sounds like you are doing that too.
So you have an ESC being over run, a motor being over run and a battery pack right on the edge.
Yes, I would say you need to prop down. You are running the recommended prop, but you are drawing too much power.
Is it possible the motor can is rubbing against something in the plane?