Ok, so first things first... Have you made sure that you have good compression? Of your compression is shot, the rest of this may help you get some more time out of The engine, but the writing is on the wall for sure! Time for some sort of overhaul...
If the compression is good, all the rest of this is well worth the time and minimal investment! The issues certainly sound like air leaking AND needles all over the place. If it were mine, I would strip the engine down and seal it first. Obviously do a full inspect on all parts since its apart anyways. Sealing it answers the question for good.
I would be sure to check your idle gap. It sounds like it may be part of the issue. It may be moving all over the place and that will just wreak havoc!!! Lock it in at about 1mm gap.
The 3 needle carb is a bit of a mystery until you see it in a cut-away view. At least it was for me. It sounds like the second (mid) needle is there for ppl who "think" they are getting a TINY bit more out of the engine by tweaking it. I think it's a pain in the arse and something else to go very wrong! Lol!!!
Anyways, yeah, go thru the carb. Re seal the needles. I would use Associated Electronics 'Green Slime'. That is THE 'trick goop of the day' according to racers and builders alike. I haven't used it because I haven't had to rebuild yet. That is coming with the O.S. .18 CVR revival tho and I WILL be using it for sure! When the rebuild happens, clean out the whole fuel system. Do new fuel lines, clean or replace the fuel filter, clean out the tank etc... Make sure it's all nice and pretty like.

What I'm trying to get at is for you to eliminate ALL potential issues with minimal to no cost to you.
After you go thru the carb, be sure the pinch bolt under the carb is tightened!(after you seal the neck up) That's a common overlooked leak point. This link has good info on how to go about sealing an engine correctly.
https://www.rcnitrotalk.com/forum/threads/nitro-tuning-tips-and-tuning-flow-chart.60832/
Be sure your head gasket is in good shape as well.
Double check to be sure your linkages and your throttle servo are working smoothly and without any slipping or binding. Check to be sure you haven't got any stripped teeth in the servo or on the arm as well.
Everything I have listed here, with purchasing of all products etc shouldn't cost you any more than $25-$35 (US) not including the fuel. These simple repairs could very well keep you from having to replace that engine. Def let us know how things go and what you find as you dig in! Good luck!!!