Finally fixed it. Found service manual showing how to disassemble and upon disassembly saw that the governor wasn't functioning properly. First off it wasn't adjusted correctly from the outside, which was an easy fix since you just unscrew and readjust then retighten the screw. I then realized that the spool part of the governor that is supposed to - through centrifugal force - upon high rpm push up on a little arm above the spool and move the governor lever(which is connected to carb's throttle plate) to slow the engine down wasn't doing that at all. The spool wasn't frozen in place or anything, it just wasn't moving up and down very freely. I hit it with some WD40 and other solvents and manually moved it from inside the engine up and down several times, then gave the whole engine an oil change in the process bathed the spool in oil. I then reassembled everything and it started right up and ran beautifully. I mowed for awhile too and it stayed at what sounded like a healthy ~3200 rpm the whole time, no surging either. I even tested the governor by going over a big pile of weeds/leaves i had thrown in the middle of the yard and right when the blades hit and tried to stall the engine the governor kicked in and upped the throttle, then once the load was back to normal it brought the throttle/rpm's right back down to normal just as fast. The thing works like new, can't believe it.
On a side note, I was recently working a bit on my father's Toro with a "Briggs & Stratton" tag on the top cover, only to realize that once I removed the cover it looked nearly identical to my Craftsman's Tecumseh. I guess Tecumseh makes engines for Briggs, maybe has been for awhile? Don't know, but even the carb was identical, just on a different side.