Put a timing light on the motor when it is doing that. Your transition ishould be at 1800 rpm not 2500. What is your compression and spark needs to jump a 7/16 air gap.
Turn the throttle until it stops. Leave the choke on until it actually starts then turn it off. If it has a manual primer pump it once or twice and leave it out until it starts. Don't know what you mean by heats up?
Leave the timing alone. Unless someone adjusted the link your timing is fine. And either your gauge is broke or you did a faulty compression test. No way that motor runs with 65 psi.
The shift linkage disconnect is behind the electric starter. Take the starter off and you will see it. When you reassemble it make sure the washer goes back on the shift shaft.
