As far as the low revs/engine/governor problem, i'd say its normal, as it keeps the engine from stalling, or overspeeding, and you don't have to keep the throttle adjustment cranked up high.
After you get the clutch off, check for a rusting problem in the works. If the engine, in the tractor, has set for a while without being used, maybe it has rusted inside and is causing it to stick on.

If the "squeaking" was occurring when the clutch WAS NOT engaged, and it quit squeaking a short time later (but now the PTO is engaged all the the time).........the "free wheeling" bearing in the clutch has seized up. The bearing only moves within itself when the clutch is not engaged (PTO off) so that the clutch hub (center part that mounts to crankshaft) can spin with the engine, but allow the belt pulley to remain motionless. This might also be contributing to the "surging at idle" due to the engine having to carry the extra load of spinning the deck belt and blades at an RPM where it would normally be running "with no external load". Take the belt off the clutch and see if the idle quality improves.

I'd look for vacuum leaks on the carb/intake system first.

How long did the carb sit? It sounds like a low speed passage might have gotten clogged from bad gas..Was this one of the engines with the bad air cleaner seal?

Thanks for the responses. First, the engine surges with or without a load and I don't believe it was "one of the engines with the bad air cleaner seal". The Carb sat for about 6 months while I was rebuilding the engine. I did take the carb partially apart and send air thru the jets/ports I could see, but I didn't take it completely apart. I did change the filter before I started it up and the gas was pretty old and I can already see some particals in the filter. I guess a complete carb rebuild/cleaning is in order. Can anyone tell me where the low speed passage is located and the best way to clean it?

As far as the clutch goes, if it is seized up, is there a way to fix or do I need to buy another one?

thanks

Rob

Carb: You can try cleaning the jets and passages using spray carburetor cleaner followed immediately with compressed air. Clean and "blow out" jets and passages at least a couple of times in both directions.
Clutch: These "PTO clutches" are generally similar to automotive air conditioner compressor clutches that I repaired back in the 70's and 80's. Back then, replacement bearings were available. I don't know if the current day clutches used for PTO duty can be serviced or not (except for air gap adjustment). If the clutch bearing is retained by a "snap ring", you should be able to get a replacement bearing at any "well stocked" bearing distributor. The bearing will have a "standard bearing number" etched on it that identifies it no matter where you go to look for it. The bearing will not just "fall or slip out".......it will require a light duty press of some kind. I have used a large bench vise with suitable adapters in the past to press these bearings out & in. If your clutch does not use a snap ring to retain the bearing (it might be "staked" in place) you likely cannot replace just the bearing and will need to buy the clutch assembly. Hopefully other members can add "yes or no" to the feasibility of replacing just the bearing here.

I would eliminate the possibility of vacuum leaks as Bill suggested(check w/ carb spray as it is running slow to see if rpms change indicating a leak). If you made no headway there, I would check the passages and seals on top of the fuel pick-up tube. One would think it would also present a problem high speed as well, but not if it is a slight imperfection. Personally, I don't like putting much air up through the pick-up nozzle on these. If you wish, you can buy these seals and bowl seal separate or in the kit.

On the PTO, sometimes when you remove one and replace it, the torquing of the bolt to hold it in place isn't the same. I had this happen on my Simplicity, and it appeared to be locked up. I loosened up the nuts for adjusting the air gap, adjusted the air gap with three filler gauges to the specs, and it worked like it was supposed to work.

I figured out the problem with the clutch...it was the bottm bearing inside the pully...I punched it out as well as the other bearing on the other end of the clutch...it too was about to go bad...just bought two new bearing for $30 and will be pressing them in tonight. It took some pounding, but the bearing came out without any damage to the pully or clutch (hopefully). The clutch website claims that if the bearings go out, you have to buy a new clutch...we shall see ($30 vs $300).

No work on the carb yet....

Rob