Small Engines (Lawn Mowers, etc.): Craftsman 20.0hp Kohler, head gasket, leakdown test

Question
QUESTION: Model #917.272246
When I fire it up there is oil coming from the exhaust. Once I start mowing there is loss of power in the ground speed and RPM's. I am afraid of engine problems? Apprx. 550 hours on it the engine. It is 7 years old

Thanks!!

ANSWER: Is there oil puddling in the air filter?

---------- FOLLOW-UP ----------

QUESTION: No. The air filter was oil free. There is a bearing noise
and as I mentioned, oil coming from the exhaust.

Answer
No oil in the air filter probably rules out a breather problem so valve or head gasket trouble would be the next suspect.  The head is probably going to need to come off next.  If you could get a leakdown test done, that might point to the problem.  If the engine is knocking, that could come from the rod, piston or valvetrain.  A loss of power in conjunction with a knock may point to the valvetrain, but they could also be unrelated.