The vertical governor arm coming out of the front cover that then connects to the carb should have about 3/4 inch movement if its disconnected from the carb. Check with the throttle lever at the dash pulled all the way down. You will have to move the governor arm against spring tension but it should move. If you are only getting 1/8 inch movement then something is binding up. Wear in the linkages can affect governor operation but I wouldn't expect it to run away like you describe. With the throttle lever at the dash in the wide open position and the carb throttle rod pulled forward to the wide open position, the holes on the carb to governor connecting rod should be slightly past the governor arm hole. Is this how you have it adjusted?