OFF the top of my head, I think there is a leak down procedure for the hydraulic lifters.

It sounds like you have the lifter "bottomed out". and then when it starts to "pump up", it's keeping the valve from seating properly.

Download the service manual from the Kohler site.

http://www.kohlerengines.com/service/manuals/index.jsp

I have the manual on .pdf, Thanks, and performed the bleed down on the lifters prior to installation.

Did you mean that when you had gotten it, the head had just been re-done? If so, can you confirm the part#s they used? If all is as it should be, I'm thinking Bill is correct on the lifter issue. Remember they don't like straight 30W oil.

It's hard to tell if the head work was recent, the engine is just low-time I think. Guy used it as a backup machine and gave it to me when he moved to Charlotte with his two Exmark Lazers. Being notorious for losing head gaskets and breaking con rods, I figured I'd take a close look at this one before it goes on C.L.

I just rebuilt a CV20 twin with no problems.
I used a broken drill bit (I have many) inverted in the drill press in order to bleed down the lifters, and with the fixed rockers installation is a snap.

I have a couple of kohlers if I can get a hundred PSI of compression I'd think I had a race horse. I verily get 80 PSI when I check them, must be the hydraulic lifters bleed down as advised. On the other hand my vanguard has 160 PSI in each cylinders, so it must have something to do with the lifters. Mine don't smoke and run great.

Thanks to all who responded, it was a bleed down problem. I replaced the lifters, set it all up at tdc, and re-assembled the engine including new intake and carb gaskets, and ran it up. It runs quite well except I still need a shot of carb and choke cleaner on cold start. I adjusted the choke (automatic) full closed, and you can eat off of the carb. I'm staring at an FC420V that might fit in its place?