Husqvarna lc121p with B&S 725EXi engine low power.

I've emailed both Husqvarna and B&S about this to bring it to their attention, given that without the air filter housing backplate the mower runs fine until it's back on, that's gotta be the issue given that everything else is good and been checked out, or is just a part of the design of the mower like it lacking an airvane autochoke and only using a slow thermostatic choke. But like, I refuse to believe that's the problem, there is no way this would leave the factory with this issue. This is become so frustrating. What makes this worse is that I've gotten it to run fine on occassion with the entire A.F. assembly, and C.C. breather tube on, then it will just decide to go back to chugging again.
 
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Further update: I took a deeper look and found that the flywheel key wasn't installed correctly, it was on the incorrect edge and was damaged, so I replaced it.
Did you use the Briggs key for YOUR engine or some hardware store unknown key? Hope it isn't made of steel. Flywheel bolt needs factory torque spec on her.
I would like to think that replacing the flywheel key and retiming the engine would have fixed the power loss, but it still hasn't and running without the airfilter plate is still giving the most power.
How old is the air filter? Is this a Chinese clone of the Briggs filter or OEM Briggs? Paper filters over time harden up and stop flowing air. Recommend replacing with a new Briggs air filter. Shouldn't be a huge difference with the filter on or off power wise.
I checked the valves and they're both in place and not loose
Did each valve have a CAP on the end of the valve stem? So rocker arm, CAP then end of the valve. Part number 238 is for the CAPS I'm talking about.
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This model of mower doesn't have an air vane on it, so it is only relying on the thermostat to heat up to open the choke.
Just fixing to ask about this.

Now remove the top plastic engine cover. Start her up. Watch the thermostat move as she warms from the muffler heat. Make sure it makes its full travel cycle and or isn't stuck.THAT thermostat moves a thin rod that connects TO the choke plate. So on a cold engine, choke plate should be FULLY CLOSED. NOT NEAR closed. Warm to hot, the stat should be moving towards open choke to fully open. About 30-40 seconds for the choke to start moving. Say 1-2 minutes running, choke plate should be fully open.

Make sure you have the choke return spring installed. This spring keeps the choke plate CLOSED on a cold engine.

Part 216 is the choke link rod.
Part 217 is the choke return spring.
Part 122, make sure this carb spacer is in good shape.

Don't over torque the screws for the PLASTIC air filter housing. No need for impact guns here. Simple snug is all you need.

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The main jet part 117, you can GENTLY pull it apart and CLEAN the emulsion tube holes. My neighbors was full of grass in there that deep inside the carb.

Get on youtube and watch the plastic Briggs carb cleaning videos. That is a simple engine to make run proper.
 
"Typically" losing power is a dirty carb which equates to lack of fuel delivery. Which leads to this.

What is the max revs she is running at? My neighbors which is exactly like yours was running at 2850rpm. Those low revs and are you cutting weekly or waiting for 6 foot tall grass and a Sheriffs notice to cut it? My neighbors is only a 163CC engine. Not the most gundy engine out there.
 
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there is only low power at start up due to the autochoke still being closed, thus leading to a rich mixture at first, but eventually leaning out once the choke is fully opened.
THIS engine takes a minute to warm up and run proper. Okay maybe 2 at most. She will not sound good until she warms up. Dead cold she will be stumbling a touch.
 
Further update: I took a deeper look and found that the flywheel key wasn't installed correctly, it was on the incorrect edge and was damaged, so I replaced it. That sorta fixed the problem with the rewind starter jerking back in your hand during starting, it will still occasionally do that. I would like to think that replacing the flywheel key and retiming the engine would have fixed the power loss, but it still hasn't and running without the airfilter plate is still giving the most power. I'm honestly at a loss for what is causing this mower to act like this. I checked the valves and they're both in place and not loose. I am at wits end.
What do you mean the valves are not loose? Did you actually check the clearances at TDC of power stroke? Checking and adjusting the valves needs to be done on a cold engine.

0.003–0.005 inches (0.08–0.13 mm) for the intake valve and 0.005–0.007 inches (0.13–0.18 mm) for the exhaust valve
 
What do you mean the valves are not loose? Did you actually check the clearances at TDC of power stroke? Checking and adjusting the valves needs to be done on a cold engine.

0.003–0.005 inches (0.08–0.13 mm) for the intake valve and 0.005–0.007 inches (0.13–0.18 mm) for the exhaust valve
I meant the rocker arms oops, my mistake. And yes I checked the valve clearances at TDC of power stroke and both valves were within sepc.

As for what slowmo asked, the key is OEM and I got the key in accordance with the illustrated parts list, the airfilter is a brand new OEM filter in accordance to the parts list. The carburetor is clean, I took off the sleeve thing of the jet and nozzle assembly and cleaned out the emulsion tubes, the thermostatic choke works correctly. It closes all the way when the engine is cold, and opens up all the way as the thermostat heats up, no binding of parts or any other malfunctions in that system. For the max RPMs I couldn't ever get a good reading as the engine was constantly running poorly with the A.F. assembly on it and I didn't think to check RPMs until it was running fully assembled. And when I was testing out the engine speed, it was over an area of low grass, so nothing was being cut.

I also asked the Husqvarna helpdesk if they had any ideas, the person who answered said that due to the engine speed bogging down when the A.F. assembly plate was installed, it could possibly be the crankcase breather was malfunctioning, which when I inspected the breather assembly, the reed valve was in good shape, it wasn't stuck open on any debris that could have gotten in, nor was it stuck shut from anything either, and the drain hole looked to be open from what I could see, the breather tube itself was clear of obstructions. The Husqvarna rep also said that since there is white smoke coming out of the C.C. breather tube that it could be either: 1. Worn rings, 2. Leaking carburetor, or 3. Too much oil. I know it can't be too much oil as I did an oil change and made sure to measure out how much I put in the engine. Can't be a leaking carburetor as without the A.F. the engine will run fine and if it was a leaking carburetor it would run poorly constantly. So maybe the rings are worn and there's so much blowby that it's agitating the contents of the crankcase and that's what's causing the smoke from the breather tube? However, if it's bad rings, wouldn't my compression tests be reading low? I'm a bit lost there.

Included pictures are of the C.C. breather assembly and the chamber. I had the reed valve removed to inspect the assembly.
 

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