Mick,
Yes: the engine sprocket can cause this problem too. The tooth profile is not formed correctly on most of these engines.
I would also check the chain for tight spots and flatness. I've had a few new kit chains that were slightly twisted. When the twisted section goes around the sprocket the chain will get tight.
I wanted to be able to offer the steel engine sprocket, but the bore and keyway sizes vary from one manufacturer to another.
If you determine that the chain is o.k., and the engine sprocket is in fact binding with the chain...I can make you a new engine sprocket with the correct tooth form...if you can send me your original. The turn-around time will be several weeks, as I would have to make it during a break in production.
Jim