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I looked at my KE25 last night. I think those are the correct settings. My LSN is about .05 out from flush, and my HSN is in a bit from flush. Not sure, but it's probably the same carb. Getting specs for those engines doesn't appear easy.

It sounds lean to me. Idle gap should be .5 - 1mm. I've never seen an idle gap change, unless it's completely backed out and the servo is setting it. Disconnect the linkage, and set the idle gap to 1mm. Then set the LSN to flush with the housing. Then reconnect the linkage, and make sure...