Had similar problems with my merc 5hp (same motor). Scouring the web hard to find answers. Here is what I found after banging my head
against the wall for the next "googlers".
The problem is rarely exhaust blockage. It may happen but I've never seen it although mentioned all the time with obs and chainsaws. That would be an outsider.
The 4/5hp model requires a rubber plug
covering the idle jet. Many times a hack rebuild
leaves this off thinking it doesnT belong there. It doesn't look like it should be there.
A worn bowl gasket
will cause fuel
to be sucked directly into the block. Massive flooding. Common problem and this was probably your fix. Ripped diaphram will also cause this.
Test your float valve and gasket
by lightly blowing air into fuel pump
inlet. Rightside up a little air, carb upside down no air.
Also, check recycle hose and valve (yes, theres a little check valve in the line). One way to cylinder only with no leaks
If it runs even poorly with fuel
all over, its probably NOT ignition related, although many posts have you running around checking it.