That is in good shape, chrisorbics!!!!! Thats wild that my 97 is basically the same bike. I think the surge is from MASSIVE crank and stroke. I thought it was a lean condition for a little while, until I learned that is just a trait of the k5's. You have to use the clutch to stop and it tends to raise the front end during a jump, so get in the habit of pulling in the lever to keep the rear fender in one piece.
I hear alot about that flywheel-weight, but it seems like it is restricting the motor. If that was good for it, wouldn't it run faster as you clogged up the air filter, ran it too rich, or dented up the pipe? The one I took off my k5 was real heavy for its size and would surely add to the inertia of the crank. Tell you why I ran it. When I bought the bike, it was wore-out. The crank had slop in it and therefore had vibration. Vibration to the point, I was losing a bolt or two per tank of gas! Eventually, it caused the flywheel to sheer the woodruff key which damaged the end of the crank. The weight mounts to the inside and outside of flywheel which held it all together, plus helped balance out some of the vibration. Now, I'm all fixed up, keeping my bolts, running well and racing with the old sandbaggers. (Amateurs formerly pros)