There are 2 two ways to fix an engine
1) toss new parts in till you fall over what is wrong
2) diagnose what is wrong then fix it.
Now the engine runs fine without the blower housing off but won't start with the blower housing on, so there is your first clue.
There is some thing that connects to or rubs against the blower housing that is preventing it from starting.
I have found a problem with the microswitch not travelling quite far enough to break the kill circuit.
The switch on these is normally closed so when the plunger moves far enough the kill circuit is opened and the magneto creates a spark.
So tie the bail to the handle and check to see if you have a spark
This engine should have an auto choke so the choke butterfly should be connected to the muffler with a control rod.
This rod can get fouled on the blower housing so either won't close fully or won't open fully/
People have a bad habit of ripping them off if the engine will not start.
As you have no idea what you are looking at please remove the blower housing and take some nice clear in focus photos.
The repair manual for the Loncin engine is on Toro's web page.
BERT - You got my number. I for sure went #1 route on this thing. I NEVER should have mentioned the blower housing "rubbing" on anything. I can't explain that but it fixed itself by me just taking housings off and putting back on more carefully. Mower runs fine with housings OFF and ON.
The Toro drawing confused me but I figured out where the thermal switch was located on the muffler. Since Electric start will work I just started it with housings OFF so I could watch the thermal switch heat up. It fully opened the choke as muffler heated up probably in less than a minute so I do NOT think the thermal switch is any problem. Put housings back on and gaped the Spark Plug at 0.30. Cold engine fired right up NP.
I will study the engine manual and see if troubleshooting section helps. Thanks for your reply! Will try using mower some more tomorrow and update.