I've moving this over from Thumper Talk now that I'm registered here. 
This is quite the issue, and has me and my mechanic guessing.
The primary issue is a surge at idle once the bike has warmed up. The bike starts, runs, and accelerates, but when I let off the throttle, rolling or still, it goes "gungk, gungk, gungk" at short and slightly irregular intervals. The other issue is that the idle screw on the carb must be turned almost all the way in to get it to idle.
We carefully and thoroughly rebuilt and jetted both the Kehien PWK 38 and the stock Mikuni carbs. We reasoned it was likely rich jetting; it wouldn't tolerate the choke, the plug was wet after idle, and we could turn out the air idle screw all the way to make it run better. It still ran really rich at idle despite the smallest available idle jets, and the surge remained no matter what. I'm convinced it's not a carb problem.
We've also replaced the reeds and the reed block gasket, and have sprayed cleaner around the engine to see if we could detect air leaks while it was running--nope.
So what's left?
The previous owner did the top end just before I bought it, but used black RTV sealant instead of a base gasket. It looks like a messy seal and the heads sits so low on the engine that the cylinder touches the clutch cable. I've read about high compression, squish, and port timing issues, so next on my list is to put the standard base gasket on to see what that does.
I've gotten comments that the surge seems like a lean condition (despite the rich symptoms at idle), so maybe there's a problem with the crank seals. There is no gear oil consumption, however. After the base gasket, I try crank seals.
Anyone else have this issue? Any insights or suggestions are appreciated.

This is quite the issue, and has me and my mechanic guessing.
The primary issue is a surge at idle once the bike has warmed up. The bike starts, runs, and accelerates, but when I let off the throttle, rolling or still, it goes "gungk, gungk, gungk" at short and slightly irregular intervals. The other issue is that the idle screw on the carb must be turned almost all the way in to get it to idle.
We carefully and thoroughly rebuilt and jetted both the Kehien PWK 38 and the stock Mikuni carbs. We reasoned it was likely rich jetting; it wouldn't tolerate the choke, the plug was wet after idle, and we could turn out the air idle screw all the way to make it run better. It still ran really rich at idle despite the smallest available idle jets, and the surge remained no matter what. I'm convinced it's not a carb problem.
We've also replaced the reeds and the reed block gasket, and have sprayed cleaner around the engine to see if we could detect air leaks while it was running--nope.
So what's left?
The previous owner did the top end just before I bought it, but used black RTV sealant instead of a base gasket. It looks like a messy seal and the heads sits so low on the engine that the cylinder touches the clutch cable. I've read about high compression, squish, and port timing issues, so next on my list is to put the standard base gasket on to see what that does.
I've gotten comments that the surge seems like a lean condition (despite the rich symptoms at idle), so maybe there's a problem with the crank seals. There is no gear oil consumption, however. After the base gasket, I try crank seals.
Anyone else have this issue? Any insights or suggestions are appreciated.