It is not the gov. For the sake of the dyno test, the 281 had a very stiff spring. Likely would give 2500 rpm or higher. I loaded the motor up at part throttle, then opened the throttle up all the way. I then baked off the dyno till rpm's cam up to 700 pto. I didn't want to let it go any higher and didn't feel the need as I run slower than that at a pull. The gov was for sure wide open all the way.
The dist in this tractor has a 40 deg plate in it - could it be something to do with ignition timing and a change in the advance at that rpm? Would a dist with a 30 deg or 25 deg plate be a better choice?