Your carb is still dirty, try re-cleaning the main jet. make sure carb cleaner is flows throught the small holes near the throttle butterfly in the carb throat. (they control the idle mixure).
your engine is running too lean at low speed, the govenor is opening up to reestablish speed, it trys to rev on the higher throttle setting and recorrects back to the lower speed it can't maintain.
it will surge untill the low speed jet delivers fuel at the right amount..
The low speed jet receives all of it's fuel from the main jet "plumming" (the calibrated hole in the carb post sticking into the bowl, or threaded jet into it)
Good Luck
Friiy
Parts ipc cut/paste
http://www.outdoordistributors.com/pdf/Tecumseh/TECUMSEH-MODEL-OHV12-202714A-PARTS-LIST.pdf