Actionpark, all engines run better with no backpressure. Check the B&S web site: 5hp go-cart engines produce 5hp at 3600 rpm but at 6000 rpm the hp is down to 2 1/2 or so. Taking the muffler of brings the 6000 rpm hp back to a little more than 5.
Your power problems could have been due to a lean mixture.
Actually, my Onan is running way too rich. Every time I drive it i come inside smelling strongly of exhaust. The problem is that the mainjet adjustment screw is stuck and I can't tune it. Today it didn't want to run smoothly, so I took off the air cleaner to access the carb and it ran beautiful.
Sounds like you need to rebuild the carb...Its gonna cost you like $100 for the rebuild kit, but it will work GREAT!!! mine run beautifully now..Onans are real power houses..they will sit and run all day and give you great power...and some are economical..My 16hp engines are ok, but my 18hp and 19.9 are gas hogs!!
If it runs a lot differently without the air cleaner than with it, ther's your problem. Too much restriction in the air cleaner. You have either a dirty element or some other restriction.97XG