You should always oil engine parts before putting them back together. Starting up an engine that was put together "dry" sounds like a good way to grind the heck of the internals in the short period before the fuel gets there.

I use Automatic Transmission Oil for engine rebuilds and after-run. There are lots of other good options out there, some likely better than the ATF I use.

As for what's wrong with your engine, dirt in the carb is a good guess. It doesn't take much dirt in there to really mess with things. Espeically check the airbleed hole on the front of hte carb. A bit of dirt in there will really mess with low-end running, and it's right up front, perfect for dirt to get in to.