Is that the engine you were talking about on your other trend. It looks like if its a kohler its not a courage so it would have hyd. valve lifters. As far as that seal goes it looks to me like the seal for the governor shaft. Once you take the governor apart it can be a job to reset it. This is a job for someone who know what they are doing. One thing you will need is a tachometer to reset it if you do it yourself.