The carb venturi must be tight and NO dig lines in the throttle blade rest location - most venturis fall out when the nozzle is removed

the blade lines we solder those ditches and it does make a difference smooth out with sand paper 320 then 500 takes a while but its not hurt when your done

then we use a Venturi o rings < its a new that has come along - the 1 1/4 indian is too large but we cut it and remove a section so the o ring seals the forward part facing the throttle blade - what this does is make the carb see all the air coming through and the jetting mix is much leaner - this causes the carb to work at full efficiency - do this before being convinced the motor is the cause

 

A- the pipe is factory flattened to clear the oil pump, no issues with your setup

B- I chased a sooted rear plug for months, similar assumptions you have made that it was NOT oil. Well it was oil, piston pin clip eating the cylinder wall, oil passing by etc.

First, check for intake leaks. Second get the carb sorted as John stated. Then you can pull the heads, super easy on a flathead and see the condition of your cylinder walls.

Good luck, fun with old bikes.