2) change the head gasket when you are getting it serviced. Oil leaks is common in the rtr's.
3) Replace the diaphragm and other rubbers parts if need be.
4) Already answered previously with pics. Not sure if engine needs to be opened.
5) Engine oil and carb could be the culprit as you have already identified issues with it. Once you have fixed these, get the bike tuned to optimum settings according to your location. Engine heating maybe due to worn our diaphragm and other parts in the carb. Use Mineral based oil. While 10w40 would be the ideal engine oil i would suggest, but for better heat handling use 20w40 grade. Avoid synthetic oil if possible.
Coming to your million dollar question, i had lost all my trust in the ASC's. They would only charge you heaps and not fix the problem in most of the cases (unless u know someone personally). Outside mechanics also cant be trusted easily unless you have a long history of friendship with them. If you are in Bangalore i can help with a trusted mechanic i know. In your cases, seems like (purely my opinion) he is trying to scare you into a major job. Coz for engine work they would charge a good amount on labour, gaskets have to be replaced and your cost of service is only gonna increase.





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