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I think Bills advice is right on target. Do you have a different coil you could try? its possible the plug wire from the coil might be grounding out especially when you move the lever. Also are the flywheel magnets clean not rusted that can cause a weak spark rusty magnets on the flywheel clean them up with sand paper.
I did find some pictures of a motor for sale like yours on ebay it helps me to understand how this motor is disassembled. The auction with the motor is here and the pics of power head can be seen. Whats interesting is the big plate bolted to motor looks to be an access plate or the motor may have been used for different applications like a lawn mower also but around plate it might be sucking air.
https://www.ebay.com/itm/67-68-69-70-Se … 0507.m3226
Joe
ps a picture of flywheel like yours with rusty magnets.
https://www.ebay.com/itm/67-68-69-70-Se … GQ&vxp=mtr
also take a look at the rust on the ends of the coil laminates (I call them shoes) where the magnets go by them they need cleaning up with sand paper also being careful not to take off anything but the rust. That’s the kind of stuff that weakens spark.
https://www.ebay.com/itm/67-68-69-70-Se … Id&vxp=mtr
The coil also has 3 wires one goes to the points the other to ground. They also need to be clean and brigtned up even the grounding screw that holds wire down needs to be cleaned up. The actual spark plug wire also needs to be inspected to make sure its not cracked pulling the motor over and having someone looking in the dark might help to see if you have arcing from the plug wire to ground. Also that plug wire looks like it goes down through the metal might not hurt to make sure its insulated if its being squeezed through metal.
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