Sounds promising, Pete. If the top seal is good, and it starts and runs, the bottom seal isn't a priority. Worry about it if you have problems tuning it later.
Normally the exhaust is held on by studs screwed into the cylinder. If the nuts resist unscrewing from the stud, usually the stud screws itself out of the cylinder. No harm is done if that happens, but it is a hassle then to get the nut off the stud. Best to get the nut loose from the stud in the first place. Also, particularly if there is corrosion on the cylinder, sometimes the stud is frozen into the cylinder, and breaks if you try too hard to screw it out. Do not break a stud off - it is a pain to get the broken part out, and often leaves you with a damaged cylinder. Nevertheless, you should remove the exhaust and clean the port - it is a regular service operation described in the manual. Be sure and follow the directions in the manual: use a piece of wood, not metal, for the job.
So, are you getting a reliable, strong spark? Seems like you've had plenty of problems with that kill wire. And, if it started easily and ran well, it sounds as if you have the right ignition timing and are managing to put the flywheel on properly.
