Kohler CV740 only runs with choke fully closed, stutters when going up in RPM's

Is that fixable?
My neighbor chimed in and said with absolute certainty the engine is dead, probably a busted cylinder, cracked or something.

A 5 year old knows more than me about these things right now so could he be right? Or do I keep spending money in fixing this (new governor perhaps)?
 
Have not played with the governor yet but did do a compression test on the engine.
The service manual states the compression should be at least 160psi and I get 125psi on both sides with very little deviation between tests and sides, it’s consistent.
I am doing this test on a cold engine (no choice) and it’s 5C/41F in the garage.
Does these test results look favorable ruling out a cylinder/piston/rings/valves issue?
Pulling apart a push mower today so may not have a chance to work on the governor, hoping these tests give me some good news at least :)
Also, I checked the oil again and it definitely smells like fuel. In fact there is no difference in smells between the oil and a tual fuel tank.
 
Update

Took the cylinder heads off and replaced the head gaskets which were in rough shape. Also put a new carburetor on and gave everything a good cleaning. Adjusted the governor while I was at it. The tractor runs great now. Still needs some tweaking but it's usable :)
 
Governor moves the slow engine speed down , throttle cable assy and interconnected gov spring is trying open the throttle, balance between closing and opening forces when engine is run is governed engine speed , if your governor has no closing force , gov arm clamping bolt could be loose engine will Rev up too much and over speed , from your pictures I can see you are missing a small plastic gov link connector bushing ,

You could try downloading a manual on this model from
www.kohlerengines.com ,to go
Owners/service manuals
Fill in engine model and spec
(From your engine cowling)
Download service manual
All details for engine adjustment are there,

Cheers hope it helps
 
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