You'll be fine fitting the fuel mod with your current setup. They improve the fuelling even on a stock bike.

Set it to where you feel the bike runs best. The exact setting on the dial depends a bit on which version of Kev's fuel mod it is. There have been a few over the years. What colour mark has the knob got?

The cutting out on a closed throttle is more than likely down to your idle speed being set too low. Check it and make sure it is up around the 1500rpm mark.

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