Yes, it does sound like a worn engine. You should be able to get a consistent high-speed needle setting once the engine's warmed up. However, once you've found a good high-speed needle setting, it should be "good" for the rest of the flying session. It should not change at all if nothing else changes. An inconsistent needle is one sign of a worn engine. Another sign is a reasonably-good top end, but lousy idle and acceleration, assuming it once had a good idle and acceleration.