Not that familiar with the Sea King variations on the original OMCs, except to realize that they use a mix of parts from different year OMC models…So, my first question is was this engine originally set up for a pressure tank? In other words, is the pressure tap on the intake manifold capped off with a plug? What hose am I seeing with the bolt stuffed in it? If the engine has the nipple in the manifold for the pressure tank, and there is a leak, it will do exactly what yours appears to be doing…..Does this engine have a fuel pump on it? It must if you are using a single line tank. A bad fuel pump could be causing an air leak or lean running condition, try pumping the fuel line primer bulb while the engine is misbehaving to see if that helps….
My other question is whether your carburetor has that pesky threaded sleeve for the low speed needle that tends to turn inside the carb body when you attempt to make low speed adjustments. I too noticed that the low speed packing nut is threaded pretty far in, I would add another packing washer and perhaps one of the plastic washers used on later models…The packing nut must be tight enough to hold the stupid sleeve in place or you will think you are making low speed adjustments, but are actually doing nothing.
Finally, I agree, you are over doing it with the large adjustments on the needles….Set the initial adjustments, make sure the packing nuts are good and snug, then take it to the water and try it out on a boat. Dial in the high speed first, then fine tune the low speed needle. One final thought, are the set screws tight holding the knobs to the needles, perhaps the knobs are slipping on the needles adding to the confusion/frustration….