Hi RT325 - yes, a bigger pilot jet was where I was going next, until I took the spark plug out, saw it was black, then took the head/barrel off and saw the oil. Now I am heading down a different rabbit hole….

What I'm seeing is NORMAL. You don't have an issue except maybe rings aren't sealing as well as they could.

Hi all,
I finally managed to do a leakdown test. The results are as follows:
I started the test at 5.4 psi
After 5 mins, pressure loss was 0.12 psi
After 10 mins, total pressure loss was 0.2 psi
After 15 mins, total pressure loss was 0.25 psi
After 20 mins, total pressure loss was 0.31 psi
I'm assuming that is within acceptable limits?
Unfortunately, I don't have a vacuum guage. Sad face.
But,...................if everything is NORMAL (except maybe rings are sealing as well as they could), maybe it's time to get a new rebore/piston/rings???
The thing I don't understand is............., why there is the oil (what looks like transmission oil, but I suppose could be two stroke oil that had been partially burned?) in a pool under the piston (please see previous video). I've checked the 2-stroke oil pump output and all is fine. The 2-stroke oil is not free-flowing through the carb as I've had the carb off for a couple of weeks now and nothing is pouring out of it. If the oil is 2-stroke oil, maybe I'm just giving it too much 'wide open throttle' going up the gears? (the engine works best when it's under load).
I'm slowly running out of ideas to solve the 'bad running' (jerky deceleration and constant cruising). 
Any comments gratefully received...
 

I like to see "zero" leakage but your readings are excellent!   I prefer to also vacuum test but your bike has two proper dual lip seals which are far less likely to have an issue like the single lip seal used on the ignition side of the 125/175.

It is absolutely normal and REQUIRED that you see residual oil in the bottom end, what else would lubricate the bearings?  And yes it often loses to dye color from the fuel, heat, and combustion contaminants.   If it was almost dry, I'd be concerned.  What I saw in your photos is normal. 

If you are trying to solve the well known bucking/surging of the 400, it's likely not the tiny bit of blowby stains seen on piston or the tiny pressure loss. 

The 360's and 400's are well known for that bucking issue...  Some worse than others.  Some have been able to "tune" most of it out but there are Yamaha service bulletins that show even Yamaha was perplexed and did not have a set answer. 

It's one of the reasons I've never been a fan of the "big bores"...  and I'm not sure how bad yours is but I'm also sure that most of us have been spoiled by modern fuel injection and computer controls...  when I drive my old Ford from that era with a carb, I'm quickly reminded of the stalling when cold and the occasional stumble and less than perfect running which back in the day was "normal".