Low fuel or clogged sediment bowl, carb screen, would not run or shut off. I would think something is going on in the magneto or cap like was mentioned given it was running well prior to. The first time I really fooled with one of these starting engines, I had magneto problems, one needed to be rebuilt, I found another laying about in a shed where leftover parts from another D7 starting engine, might have been a bosch, finally had the timing right and a hot magneto working correctly, fired right up, but was burning oil/smoking excessively, fouling plugs, but was running without skipping or backfiring.
I was reading in an old D7 7M book, says the crank needs to be 25 deg past TDC and is the correct firing point, thats in the servicemans reference book for the starting engine, and about the same as I described in the last post, but I would check the mag, cap and so on, could be a simple fix.
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