Scratches are pretty normal in our engines, as long as they are not so deep... if the compression is good, there is nothing to worry about.

The problem must be somewhere between:

1. Tank and it's associated components.
2. Seal problem (Backplate/needles/carb throat/front bearing)
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It is also normal that the engine looses it's compression when hot, it's because of the liner's natur, that expands in the upper part.</p>

You haven't said anything about the glow plug.... have you checked it?, it would be a good thing anyway to put a new plug in it, fresh fuel... I bad plug can drive you nuts trying to finde the problem...everything else may be ok, but if the plug is damaged (coil with excesive carbon, not bright etc.. that the engine starts and that the plug glows doesn't mean that its good)</p>

and if you are not sure about the needle settings, than reset it to "factory settings"... 1.5mm gap between the spray bar and the mixture screw is a good starting point.</p>

Saludos,</p>

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Jorge</p>