Mower overhaul, engine rev problem

Hi, I just overhauled my mowers engine (my mowers a Craftsman model #917.374821 with 6.75hp and a "pressurized" oil system) after finding it burning lots of oil. It has been through only 3 seasons and last season it started to burn oil (lots of it) and it backfired every so often. So this season I overhauled it, well sort of, I replaced all the old gaskets including the head gasket but not the cylinder head O-rings.
After I replaced all the gaskets and scraped off the carbon from the cylinder head, I reassembled the mower, I even washed the thing it looks factory new. I soon found out that I could no tighten any of the bolt to their specified foot pounds of torque, the flange bolts could only be tightened to about 15-20 fpt far from the specified 115-120fpt printed on the card that the new gaskets came in. I found this out the first time I striped a tap. The head bolts could only be tightened to about 40fpt, really the only thing that could be tightened to the correct fpt was the fly wheel. I don't know if craftsman screwed up with the instructions or the mower, might be both.
Anyway, I started it up for the 1st time after the overhaul and it revs up then stops for a millisecond then revs up again. It works but lacks power. I think it could be water in the gas, but since the bolt problem and the previous problems (which aren't happening anymore) I am starting to think it may have to do with the cylinder o-rings and it is allowing some pressure to escape into the crank case and because the carb works off vacuum from the crank case it may cause fuel mixture imbalances. But the sound it makes is just unusual to me, so I am going to upload it to a webpage of mine temporarily so you can give it a listen. Please help me find out what's going on. Note: the sound clip is of the highest quality done with a studio quality mike so I can assure you that there are no crapy computer sounds, all of it is from the engine. And after the first 20 seconds or so I pulled the carb manually to full open. (Before that I am not messing with it. That is the rev up and down thing I am talking about) listen to it at; http://www.angelfire.com/crazy/hvfox/crap/mower.mp3
Thanks, HVF
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Is it possible that the head bolt specs that you are following are in INCH POUNDS and not FOOT POUNDS? And, that this factor of 12 difference is causing you to strip the threads into which the bolts tighten?
Is it possible that the governor is not correctly adjusted and thus causing the RPM surging?
When you refer to cylinder head O-rings, could you be referring to the metal piston rings? Or are there O-rings around the valve stems? Or, something else?
HVF wrote:

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No I looked and it says foot pounds I thought it was inch pounds at first but it says foot pounds. I guess its a mix up, but what are the real values? Surely the bolts could not be as loose as 10 foot pounds thats barely above finger tight. Sorry for mixing my terms I did mean the cylind head rings.
Thanks I will check the governor.
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