I was wondering if it was that grommet that fits into a slot on the case and engine cover, but I couldn't figure out what the red might be. It might be that they tried to glue it in with some red gasket sealer and it fell out?

 

I don’t think it is a proper grommet however it could be a piece of plastic that they have placed sealer on to try and do the same job. 

still stuck on why it has suddenly started to run like a pig. 

That was my second thought, that they tried to glue in a piece of plastic in as a substitute for that grommet. How do the point surfaces look?

I couldn’t really see them behind the flywheel. I did remove the plug and it looked ok, and when I earthed it out it had a spark. 

It can’t be anything major as it starts again now, we’ll that’s what I’m hoping. 

Maybe the mysterious item is a dead roach!

true story:
I was tearing down an old nasty JT motor that I got as a package deal on one of my JT purchases. It was disgustingly dirty and had an odd aroma…… as I removed the chain side engine cover I found that it was packed full of dead roaches. Been there so long it was just a bunch of crusty carcasses.
But wait! There’s more to it.
As I was wiping it down with an old rag I noticed a segment of jaw bone/gums with a few teeth!! It turns out the rag I was using was cut from an old flannel shirt that my son wore as part of a redneck Halloween costume and the rubber teeth came out of the pocket that was part of the rag I was using. I nearly fell off my shop stool having just discovered all the dead roaches and was eerily concerned about the aroma.
 

You should be able to see the points through one of the openings in the flywheel. In fact it's possible to clean them through that opening, but because I had a puller that I purchased decades ago, I ended up popping the flywheel off to clean mine.

My first thought was it’s the coating that wraps the primary coil and that’s affecting the operation now. 

Not popped the crank seal behind the mag, or partially pushed out at an angle & letting air in. Right side seal the same but would smoke out of control from trans oil. Or stray lumps of carbon bouncing around & plugged the baffle. Maybe i've said all that before haha. Better get a flywheel puller 27x1 left hand thread.

So update so far. 

Plug is good 
carb is all cleaned and set (air mixture screw 1.5 turns out. 
No oil seeping from anywhere. 
good spark. 
clean air filter. 

Therefore with apart, fuel and air it should go bang. Answer no…. Lol. 

I think the stater ring has slightly moved through not being used lately then being ridden. This would explain why I first stated to lose performance, then started feeling like it was being strangled and finally popping back. 
if it catches within a few kIcks then it runs but won’t rev out, if you don’t catch it it floods then starts to backfire and pop. 

Now do I place it into a bike shop to have a new set of points fitted or buy the flywheel removal tool and do it myself? 

Get the flywheel removal tool, it's inexpensive and you'll need it down the line anyway, if you ever replace the left side crank seal. You may find you don't need new points, just need to clean them up well and get them adjusted correctly.

By the way when you use the tool, and I read about this in a forum before I did it, when it finally pops off it pops off fast. You almost feel like you're going to break something, then suddenly it pops free.