Thanks heaps for the responses guys. There are a couple of avenues in there that sound promising.
Dave, I'll check the air intake. The vac cap is brand new and fits very snug. The fuel line idea is really interesting. The dust in the carb is definitely black. I reckon it could be little bits of black rubber from the fuel line.
Ruttly, I'm pretty sure about the fuel mix in terms of the jets. So that does lean it toward an issue with air.
Dave, I didn't know there was an o-ring on the idle mix screw. I've never had it all the way out before. I'll keep that in mind.
Gary, I've already changed to the raptor. I didn't inspect the fuel thoroughly, but it was fresh fuel and I have a pretty fine filter on the funnel I use when filling the bike. However I'll check the fuel as part of the torubleshooting. When you say "spray the carb", what do you mean? What do I spray it with?
Stew, that's a really good point about the diaphragm tube. I didn't damage it, but due to my inexperience, I didn't clean particularly carefully. I didn't even realise unti now that that tube slides up and down. I'll take care of that. As for the diaphragm itself, I wass very careful in getting that out (and in putting it back in). I also made sure the rubber was seated properly between the top of the carb and the carb body. That piece goes in and out very easily.
Justin, Yeah, I was thinking the same as you. The jets were working well for a week. It went off again after I ran on reserve. I figured it probably wasn't the jets but just wanted to try something (I had been meaning to test higher jets anyway, as part of my learning). As I mentioned I hit the upper level and started to drop the performance. So at least I know where the limit of the jets is now
Yes, 'surging' is subjective. It comes on in second and third gear in the 1/8 - 1/4 throttle range. Everything else runs great. It feels they way it feels when I'm riding into a moderate swirling headwind. The bike feels like it's being held up ever so slightly in short irregular bursts. Based on all my reading on here, that points to the spacer mod (which I have done, and had working). I think you're correct - it's something else.
As for the washer OD size, I haven't measured them but they are definitely smaller than the spacer, and slightly irregular circumference. I thought maybe that was creating some sideways play in the needle.