Thanks for all the comments.

I just took the carb and inlet manifold off - no obstructions there. Also took out the fuel tank and checked the lines - looks ok. I will get the lines changed tomorrow.

When the engine rpm decreased from 3/4 to full throttle, I noticed a lot of smoke from the exhaust. So the high end needle was probably not set lean. Closing the high end did not increase the rpm much, but once I closed past the 3/4 throttle, the engine surged and rpm increased dramatically... weird. It looks like something is restricting the air flow at beyond the 3/4 throttle, or there is a fuel surge (rich) at full throttle.

Just wondering if the pressure return tube from the muffler could be a cause, due to over-pressure at full-throttle?

Chris