The bore in that engine needs to be measured (as per Kohler engine manual) if the bore is tapered, out of round, scarred, pitted or otherwise out of spec. it needs to be bored out, or you will end up with the same problems that you currently have. The plastic governor needs to be replaced as do the rod and piston, the valve guides need to be checked and the seats and valves should be ground at the very least, the head should also be sanded flat. Decking the top of the block is optional unless it isn't flat.
If the clutch isn't making any noise and it releases smoothly and pulls good then you don't really need to rebuild it, I would however put a new bushing in the 3 pin driver, just to help keep everything lined up.
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