Well Ali, you've found the lost motion device that I was looking for, and its purpose is just as you have described it. Much more complicated ways of doing the same thing were used on car chokes back in the days of automotive carburetors.
If you could take a picture of the entire governor plate, with choke link correctly installed, from a position perpendicular to the plate, like the second-last picture in your previous set (the one with your thumb featured prominently), I think it would be very useful to other people in the future. We've never established a decent archive on the rack and pinion governor control.
The low compression pressure is very likely to be due to one of three things:
1. Blown head gasket.
2. Terminally worn piston rings.
3. Leaky valve or valves.
I suggest you begin by putting one spoonful of engine oil into the combustion chamber through the spark plug hole, then immediately repeating the compression test. If it makes little or no difference, you can cross off worn piston rings from the list. We can then go on to investigating the other two mainstream possibilities.
