Are you adjusting the float so that fuel just barely gets to the bottom of the site plug opening(not dribbling out) while the engine is running on level ground?
Try removing the gas cap from the fuel tank. There could be pressure building up in the tank from too much fuel returning to the tank and foaming up. It could be that the regulator gets a reference from the return line. If the pressure on the return goes up(pressure in tank rising) then the regulated pressure might go up the same amount(still only 5psi above return)? Is the tank vent clear? Worth a try.
Do you have a "T" fitting just before the carb that you are using for the fuel gauge while its running? Have you tried another fuel gauge?
Last edited by ssmonty; 03-30-2013 at 01:08 PM.