Ariens yt12 with replacement engine B&S 28r707

Sounds like the exhaust valve is leaking badly, a complete valve job is probably needed. With the plug back in, rotate the flywheel backward to check the compression.
You should reach a point that the flywheel will stop, and rebound back, with some bounce, it is a quick way to check an engine's compression.
 
Do you mean the valves need to be lapped? I want to say that the engine makes a clickity clack sound when it does run and I'm pretty sure that's not what it's supposed to sound like. But not like a knocking sound.its hard to explain, I can post a video tomorrow
 

Another quick video

Would this also indicate a loose valve seat? Some sort of visible air coming out of the carb.

And if there was a loose valve seat, would I be getting any compression?
I think I should get a gauge to test the exact psi.

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Have you tried a new head gasket?
Air coming back through carb is usually due to head gasket blown between cylinder and valve chest.
 
Yeah, you need to have someone go through the valve system, and just lapping the valves won't cut it. That intake seat may be loose as well, and if that needs to be re-peened in, the seats and valves definitely need re-cut.

For those that are not sure, this is not an OHV model.
 
I dug out an old block with valves, I'll just pull out the intake for this pictorial....
 

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The Neway seat cutter cuts the seat at an angle that is 1 degree off from the valve face, that difference is where the seal is, just lapping, just smears the contact over a huge area and valve leakage is certain, so the repair is poor and will not last long.....
 

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