Here's a direct link to the PDF service manual from Kohler's website.
How far apart was the engine, and were Kohler or aftermarket parts used? You say you have an undersized rod...was the crank turned to the 0.010" under standard undersize? If not...there's your problem. Other things I have seen cause this are too little crank endplay or an improperly assembled electric PTO clutch. Even a rebuilt engine is not that tight, and you should be able to turn it by hand. The ACR is unlikely to be causing the problem, as the starter should be able to spin it over with no problem, even if the ACR isn't functioning. If it turns hard, that has nothing to do with the ACR.
You don't need to double up head gaskets...the compression ratio is very low on these to begin with. The plug gap is independent of engine bore size. I can't remember the plug gap off the top of my head; I know for the twin cylinder Kohlers, it's like 35 thou or something. 10-20 is way too small. 30 thou would probably work. The service manual I linked to will have it.
Oh, and if your small-engine shop says these aren't worth rebuilding...find a new shop. That's pretty poor advice on their part.
Here's a picture of the throttle/choke linkage.
