1) The mower was running fine lower than expected revs with no air filter after doing more careful analysis
2) I applied the air filter and it would cough and splutter, then eventually stall.
After some thinking I went back to the linkages and noticed the idle and full speed adjustment screws were way out of whack (the linkage set was a bit mangled), compared to my original experiences with tuning these engines.
With the engine going ( after replacing the linkages and with no air filter) I adjusted the screws until I got a sweeter sound and eventually got the air filter installed with the engine running. Once I kept the engine going with the air filter on their was still a little coughing and spluttering from the excess oil however after 15 minutes of good mowing in the long grass at the back of my suburb the smoke cleared and the mower was running really smooth.
So in short, I need to pay a little more attention to the carby linkages to find that right set point in future. I should have noticed in the beginning the linkage and tuning screws where way out of whack and bent. A simple switch from a good engine sorted it all out.
So:
Replaced the float and needle seat which stopped the flooding (float was full of fuel) and someone had a bit of small hose for a needle seat
Replaced the mangled linkages off a blown up engine off my spare parts pile
Change of oil and blades
Now this mower is a damm good runner and good for another few years, all for less than $30.
Thanks Grumpy, appreciate your help as always.