I am trying to figure the same thing out on an Avery R, which is pretty much the same tractor/engine but different hydraulics.
Which carburetor is on it? I am thinking a Marvel Schebler TSX400 is the correct carb. Mine got pretty gunked up and had a J-B weld repair around the inlet needle seat. I know the TSX400 can work: There is one on Mother's BG with the same IXB3 engine.
So far I have had a TSX33 on it (Ford Carburetor, don't know which model: I installed the throttle plate and shaft from the TSX400 so it would work with the Hercules governor link) and also a TSX455, which I bought off Ebay after determining that it did fit that engine in a power unit configuration.
Mine did not have any governor response. One thing I discovered today is that the link from the carburetor to the governor arm is way too short. It was the one that came with the tractor. (I don't know if it was from the different carburetor or from a worn governor, although everything inside the governor looked pretty good when I took it apart to look at the flyweight assembly.) I made a new link from a piece of 5/16 rod, measuring with both the governor arm and the throttle shaft at wide open throttle. The governor is working now, but like you describe there is still a pronounced surge.
All my I/T manual says is to set the distribuitor static timing at TDC. One thing I have noticed on mine is that the timing is varying a lot. The TDC mark can be seen throught the pipe plug hole in the bell housing just to the rear of the carburetor. When I do have my advance timing light adjusted close enough to find the mark, the mark is actually jumping all over the place. I don't know if that is due to the timing light itself or worn bearings in the distribuitor. When I quit the timing dial on my light was reading about 20 degrees. But it still has a surge.
If you figure something out on your tractor, please post back here what you did. Thanks!
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