Small Engines (Lawn Mowers, etc.): Tecumseh HM80 wont start, magnet strength, blue flame

Question
Hi, got a chipper with Tecumseh HM80 motor - won't start
Tried so many things, i'm at my wits end
Please Help! Here are the details:

* It is Tecumseh HM80 Spec: 155455M *
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Cranking it with electric starter -
Get occasional mixture ignition on an occasional power stroke
(only when i up throttle above idle sufficiently)
When it ignites like this sometimes - it won't run and
spits big blue flame out exhaust & sometimes small flame out of
intake (machine jumps sideways - like reaction to jet exhaust)
The rest of time - unburned mixture comes out exhaust
(tested for that)

What i did:
1. Rebuilt & adjusted carb,then replaced carb & adjusted that one.
2. New spark plug & solid state ign. module - timed per specs.
3. Spark tester shows good consistent spark.
4. New Flywheel with ring gear - check magnet strength - OK.
5. Flywheel key in proper position & not sheared) - OK.
6. Replaced all intake/carb gaskets.
7. New fuel tank & fuel lines - all clean.

I'm thinking only thing left to check are Valves/clearance/seating
and timing. Valve timing-off implies Cam vs Crank gear mesh slip.
Seems slip is unlikely & to check it have to open up crankcase,
take everything apart - worst case.

What should I do next? Thanks

Answer
Based on what you have done I'd check the valves as the next step.  This link should help.

http://www.smallenginesuppliers.com/html/engine-specs/tecumseh/Tecumseh_L-Head_E

Let me know what the valve gaps are.

Eric