concave side of the float faces "up" when you have the top inverted (tab is down toward the float needle seat). I usually adjust, if needed, by bending the arm slightly. I just eyeball them to level -- some raise the outside end slightly above level, presumably to help insure float valve closing. Continue to think there is a simple fix for you issues, but it does sound like a PO did a job on the h.s. jet.
The .038 jet is the right one for the carb you mention (0431879). That carb was used on the '86 Johnson J35AELCDE (maybe others). But model J35RCDM (and E35RCDM -- the motor you cross reference) used carb 0439389 with h.s. orifice .063 (63D).
I gather you are replacing the oversized carb that PO's shop had installed, or at least the h.s. jet, but there are a couple of different carbs used on '86 Johnson 35s (with different jetting). I'm a little confused about what your are doing (i.e., what carb you are using, Did the military specs identify a specific Johnson/OMC model corresponding to the military motor?) That plastic top in your carb pic wasn't used until about '92/'93, so guess I'm just not sure what you have there -- or what you need.
