The needle has five rings and a circlip that can fit on any ring.
With the pointy end of the needle down
and the circlip on the topmost setting, the throttle assembly will let the needle down the furthest into the jet - meaning it is set for the leanest setting, as it blocks most of the fuel from entering the chamber.
With the circlip on the lowest setting on the needle, the needle is prevented from dropping down too far, which means the maximum amount of fuel can pass through.
The circlip was on the lowest setting on my needle, which means the previous owner ran it as rich as he possibly could.
He did so, I am guessing, because he was having trouble starting (the starter jet was fouled, and there was rust and particles in the gas tank).
The result of the rich setting was a buildup of carbon in the head, resulting in the decomp and possibly the valves not setting properly, which meant compression began to drop.
As compression dropped and fuel problems continued, carbonization accelerated (too much fuel coming in all the time, and blowing right out of the engine, incompletely ignited), .... the previous owner kept enriching the mixture.
This is my current theory.
I'm resetting the circlip back to the factory setting (the middle of the five rings) and hope that with a decarbonized head, a clean fuel tank, a new fuel filter, and a cleaned carburetor, that I should be able to get the bike running again pretty soon.
I'll keep you posted.