Gentlemen,
Over the last few months I have ran into several surging engines that were not governor issues. Last one [v-twin with dual barrel Nikki] would idle fine and run at full speed off load but until loaded then would surged badly; couldn't cut grass without it surging. The culprit has been idle speed setting. When set too low and the engine is running at mid range or above the governor would push throttle plate closed cutting off the fuel supply as it tries to regulate the engine speed. The solution is to set the idle speed to spec or slightly higher using a tach.
While on the subject of surging I had several Kohler Courage single cylinder engines with surging that were governor related in the last year. Setting the static governor setting as instructed in the SM didn't help. I have found that putting a 0.010-0.030 feeler gauge between the throttle plate stop at full throttle and then setting the static adjustment resolves the problem. This appears to be a wear issue in the governor and linkages as this takes this play into account as you doing more of a dramatic adjustment along with a static adjustment. I believe this is probably likely wear in the governor's fly weights area. The results is the elimination of surging and a more powerful engine performance wise.
Hopes this help those with unexplained surging issues that normal procedures don't fix.