Steve, Harry (and Don), I think I'll replace the governor, but I'm going to try to do so without removing the piston, crank, and cam (if that is possible). After tearing into an M18 which had its governor let go, I believe in at least getting this part right. If the engine has substantial blow-by, and/or smokes I will use it sparingly; if it still knocks, then it will get torn down again and get completely rebuilt.
Please note that I already qualify for free shipping from Cub Cadet Specialties with all the parts I know need replacing right now --without touching the rod, piston, rings and machine work.
And yes, Harry, I will lap the exhaust valve in too.
Again, thanks for all the feedback, especially Mr. Blunier who seems to have my best interest at heart.
To those who say it should be "done right" --it should; but a full rebuild is risky because the break-in has to come out right too, and I'm not yet clear on how this critical period should best be handled.
Edit 1: Harry, we are in agreement, then.
Edit 2: As an aside, I'm pretty sure this engine was never opened up, because it took a LOT to get the oil pan off. So I don't think the governor has disintegrated and the evidence covered up. Instead, what I think happened is that the engine was partially disassembled for painting, and when it came time to put it back together "Johnny" couldn't figure out where all the parts went for the linkage, and so he did the best he could, based on what he could find on the web, etc. (He got the "second hole" part right
.) If I don't find all of the parts of the governor still in the motor, then I'm wrong. But I think I'll find what appears to be a fully functioning governor on the INSIDE of the motor, at least. Stay tuned.