micka, I misread the Honda manual, it says "BTDC", and because that didn't make sense without specifying how far before top dead center, I somehow read it as "bottom dead center". In practice the inlet valve always stays open in the early part of the compression stroke, so you can't measure inlet valve clearance at bottom dead center.
Did you know you can replace the "valve adjuster" (the little cup part on the end of the valve stem) to change the tappet clearance on that engine? Unlike Briggs and Stratton engines, you do not grind the end of the valve stem, you either replace or grind the valve adjuster.
The method B&S recommends to ensure you are in the right place on the cams for measuring tappet clearance, is to go just past top dead center on the compression stroke, so the piston has moved down the bore about a quarter of an inch.
Honda specifies a compression pressure of 30-60 psi at 600 rpm, and 120 psi at 1200 rpm, when pulling the starter cord. You said you had an inlet valve tappet clearance of 0.008" after you had adjusted it. Honda specifies 0.003 to 0.006", so you are on the high side. In your situation I recommend that you lap the inlet valve. I do not think being able to hold petrol at atmospheric pressure, tells you that it can hold air at eight times that pressure. As a further bonus, lapping the valve will reduce your tappet clearance.
The Honda manual says the ignition timing is 20 degrees BTDC, which would kick back awesomely unless they have variable ignition timing. This is the reason I wanted you to try to check the actual ignition timing - in case something has gone wrong with the variable ignition timing system.
Post Edit: These engines do not have variable ignition timing: Honda relies on heavy flywheels to prevent kick-back.
Last edited by grumpy; 12/04/13 04:18 AM. Reason: Add post-edit