I've rebuilt 5 Kohler engines using the rebuild kits I bought off of Ebay. They are a mix of Stens hardware and Kohler gaskets. The oldest one has close to 9 years on its overhaul (Cub 1450) and has had a lot of hours - still runs like new.
A 127 should have the steel governor gears so I wouldn't worry about them - if it were newer and had the plastic gears I'd replace them as part of the rebuild.
The K301 kits are cheap - especially compared to the pricing of an all Kohler kit (same parts different boxes?).
With $40-$60 worth of machine shop work you can have a brand new 40 year old engine for less than $160. The key to making an old K series last is keep enough oil in it and keeping it somewhat clean.
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Today's Featured Article - New Life for an Old Allis - by Tyler Woods. My friend Jon, has an old '39 Allis Chalmers B. He thought it a marginal tractor that had long since served its time. She smoked terribly and never had much power but he couldn't afford another so he was limping along with what he had. Jon's Allis has a small front loader and though it doesn't carry much, it serves his needs. It was the hard starting and low power that made him think it was time to replace the old girl. Jon called me to help him discover why his tractor wouldn't start
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