Stihl 026: Idle Speed Too High

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Back the low screw out until the idle drops and the chain stops moving. Then while running, hold it at wide open throttle for a good 5 seconds to see if the max rpm's hold or keep climbing.
By "backing out" you mean CCW, correct? (CW would mean turning the screw to its stop, starving idle fuel.) How many turns "backing out"?
 
Yes, ccw..just enough for the idle to come down. It should be less than 1/8 turn. It'll either fix your idling problem, expose a leak, or help you determine a bad clutch.
 
Turning the idle mixture screw out, as you suggested, dropped down the idle to a "normal" level. Then, pulling the throttle all the way in revved up the engine to the max within a second, and it held at max RPM, and did not go higher if I kept the throttle wide open for five seconds.

But this does not "fix my idle problem". The engine runs too rich if I oversaturate the idle mixture, even if it brings down the idle speed. It should be adjusted with the speed, not mixture screw. So what does this experiment tell you as to the cause?
 
Every 2-stroke engine I have ever worked on (this applies similarly to 4-strokes) has a sweet spot for idle adjustment: either side of it the engine runs rough, stinks too rich, stalls too lean or loses power. I's in every owner's manual I've ever read: adjust to highest idle, then add 1/8 to 1/4 turn towards richer, THEN set idle speed with the speed adjustment

In my case, it took about 3/4-1 full turn to bring the idle down with the idle mixture screw (as you suggested for the test), with an idle speed screw that's already non-functional (in its lowest setting). So, I don't regard this method to lower idle speed with the idle mixture screw an acceptable solution, especially with an idle speed adjustment screw that no longer works.

Back to my question: What do you think the test result revealed? What is my engine's problem?
 
The crankcase seals, one on each side, but you'll need a special seal puller and installation punch. Most folks use an improvised method for removal, but the installation is too important to risk without the correct tool.
 
Sounding like a broken record, but you simply need to strip that saw down to where you can see the crank seals, clean the case up well with degreaser & hot water, and then find/buy the two (flywheel & PTO side) seals for it.

Then take it all to your local Stihl dealer & have them replace the seals. Then have them do a pressure & vacuum check to see if anything leaks.

Seals are 9640 003 1190 & 9640 003 1600.

Call the dealer(s) ahead of time, to make sure that they have the OEM Stihl seal puller & the correct jaws for the 026 first, some do not.

You’ll spend a little, but save a lot of money in the long run.
 
That would nice, but I've never used a dedicated insulation tool.

With that said, the 026/260 flywheel side seal is one of the most difficult to replace, simply because it's so small.
If you think the 026 is bad without the right tool, you should revisit the fw side on the 044, lol.
 
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