How does this choke work? When is it richening the mixture? when the brass cylinder is pulle d to the top or bottomed out?

Pulled to the top is the choke 

Looking at how you have the adjuster wound well up i think you'd better be sure its got cable clearance when down or it'll be rich constantly.
Also the bowl has a breather/overflow small clear tube [probably gone brittle with old age] that 'must' find its way out a hole in the bottom of the case directly below it. If pipe doesn't exit it can stop fuel flowing in as vacuum stops the float dropping. That's when the cover is on & all as normal sealed up. On full throttle 'that issue' can arise--as implausible as it might sound!!
& thinking again, might be wrong but think any extra breathers high up on the carb have to go up the air boot towards the air cleaner & well away from direct sucking at the carb mouth.