Before we begin tearing the engine apart, let's go back to the original problem. It started running away after you rebuilt the carburetor? When you said you controlled the governor by hand, did that mean you actually put your hand on the governor arm and moved it? If you were using the throttle with spring and the governor was out of adjustment, that might not be enough force to drop the RPMs. In other words using the throttle manually to try and slow it down. The spring may not have enough strength to pull against the governor sufficiently. Have you adjusted the governor arm and governor shaft yet? When that throttle plate closes an engine will not over-rev and race at full RPM! You said the throttle plate closed and opened? What happens when you put 1/2 choke on it when it's running away? Could be something as simple as linkage binding up somewhere. In regard to your question as to whether the governor being out of working order in the engine, I would surmise that something ground the gear teeth off the governor gear. That would be like having no governor at all. You should feel resistance to moving the governor arm. That would indicate to me that the governor is working, just not set properly. Hope this helps.