I have a kt735 spec 0005g1 that is surging bad. I've set the valve clearance, new plugs, new oem (walbro) carb. I checked compression and one cylinder has 125 lbs and the other has 97 lbs of compression. does this indicate a blown head gasget? can there be any other issues?
Have you verified both cylinders are actually firing?
Spray a shot of water on each exhaust pipe and watch for it to boil off immediately. The one not boiling off is the none firing cylinder.
These V-twin engines will fool a person because there is no imbalance/ vibration. Pull the upper fan shroud and disconnect the single wire on each coil. Then fire it up and check for more power and no surge.
This usually means the "kill" harness to the coils is bad. The inline mini diodes typically fail.
Often times, people replace a coil and never check this harness.
If it has been jump started multiple times in the past, it will often blow these diodes out.