If you change the needle position you would also probably need to adjust the idle mix to compensate at the low end.
I would Suggest that you restore the carb to where it was - needle in the middle and use my guide to express repair to adjust the idle and throttle screws WITH the air filter on.
And then get that muffler spotless. I say this because the Express engine almost always runs fine with the needle in the middle spot, a fresh air cleaner and a clean muffler.
My best guess is that the clogged muffler isnt allowing enough air to be sent into the cylinder.
So once more, Clean Your Muffler!
You'll be going in circles with adjusting screws otherwise.