Bike runs better when I turn off fuel valve ???

Why not try moving the needle clip up a notch or two? Sounds like your motor likes to be leaned out! Mine is happiest on the leanest setting, but I am still running the stock jet on my NT. I need to move down like you did, methinks.

Also too much oil, use 20:1 till you break it in then 32:1, I use 50:1 and some have gone with 100:1

Does it leak fuel when not running? I've had needle valve stick with trash and it ran like garbage till I shut off fuel due to float sticking and fuel overflowing into carb throat. Made it a puking blubbering pig till it got cleaned out. (Fuel filter fixed problem)

What brand of oil are you using?

I run Klotz Technoplate, a 20:1 mixture calls for 8oz of oil. After 300 miles I switched to 6.4oz of oil to get a ratio of 16:1. The engine has performed flawlessly thus far. As the motor breaks in you should start noticing more power and better throttle response too.

I run this in my Zenoah powered R/C cars. I have/had motors that produce over 6.5hp and turn around 20,000rpm. This stuff has always been good to me. It smells good too.

http://www.klotzlube.com/proddetail.asp?prod=KL-100_Quart&cat=8

Set the clip, second notch from the top after you re-jet the carb.

As 2door/Tom pointed out, you will eventually cook that engine if you keep running it the way you are.

I live in central Texas @ an elevation of 1240 ft ASL I soldered and re-drilled all my NT carb. jets with a #73 wire gauge bit and run the clip second from the top, all of my engines run real nice that way.

map

light brown is the right color for an engine thats already broken in, but for an engine that is still in the break in period, i think a chocolate color is what you should see, since you are using twice as much oil. if your carb is properly tuned, you will develop more power after break in. it sounds to me like your carburetor is flooding. your idle screw is probably not adjusted properly. they sometimes come from the factory that way. check your idle screw. thats the one on the carb with the spring behind it. it should be 3&1/2 to 4&1/2 turns out. check your manual for exact instructions.

the reason why it "ran like a champ" when you shut the fuel valve is because as the float bowl runs out of gas, the air-fuel ratio is leaning out.
an engine that's running lean will always make more power than one that's running rich.
but, you say that you put a 68 jet in it?
wow, that sounds way too lean in my opinion.
did you ever run it with the stock jet (which is usually around a 70)?
all engines are different, but 68 seems too lean...I'm running a 72 jet in one of my carbs, and a 74 jet in the other.
but as i said, no 2 engines will run the same with the same jetting.
it could be possible that your float level is set too high, causing the carb to slightly flood over, which would explain why it seems to be running rich with a 68 jet.
the way you describe things, it sounds like it's too rich (air-fuel rich, not oil-fuel rich) even with the 68 jet.
drop to a 32:1 fuel-oil ratio, check your float, put the stock jet back in, check for air leaks and put an ngk plug in it.
then, start all over with your tuning.