Ive no experience of Red Lodge but it sounds to me like you are loosing power, we run a Honda cadet with a Strong motor fitted,we race with another Honda running a very strong rpm sp engine, and we have experimented with running different gearing trying them against each other and I dont find it so critical on a Honda, I dont think a top motor to a standard motor would pull a lot more than a kart length so if he is dropping 4 kart lengths I would check / clean carb, but first make sure its getting full throttle (had this on ours!!)
fwiw I try and keep max revs to around 5800 but we have seen as high as 6,100 with a tail wind.
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