Set the timing according to spec as described in your operators manual. That is #1 at TDC, with the distributer installed so that the rotor points to the #1 terminal. If you wish, after doing that you can adjust by ear to the highest rpm. At idle these engines sometimes sound as if they are laboring unless you make a SMALL adjustment. However, I think your problem is the carb is too lean, possibly due to a partially plugged main jet, which is not adjustable (provided your carb is similar to the ones on the C113/123 engines, yours is a C135, same basic engine). It needs to be disassembled, soaked in carb cleaner, possibly overnight, blown out with compressed air, and a new kit put in. You say it has only one adjustment, if so that is the idle mixture jet, just turn it in or out until the engine runs smooth at low idle, not wide open throttle.It should also have a screw for the idle speed. Be sure the float is adjusted to specs.
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