Mark,
Sorted!! many thanks, you nailed it!
Re-set the ignition timing to 2.5btdc and the problem has 95% gone. Heaps more bottom end power as well, and it revs right thru more or less to where you dont want to be going on the road anyway.

Like i said, many thanks, i have been trying for a year to sort this out and i now love my dt/yz hybrid!

cheers
les.

p.s., do we know the full advance timing btdc of the yz250 1979 (as a point to aim for)??

I have never found a timing curve diagram for those.

Two strokes benefit from retarding the timing at high rpm...  they don't need the advance and advanced timing hurts high rpm power and ability to rev. 

Timing advance does give a huge boost in midrange power.  So the "advance curve" will actually retard the timing significantly at higher rpm. 
As I may have said before, you can carefully play with it...  I'd use the "fixed" timing specs for 250's with same bore and stroke as a guide for "max"...  so maybe up to 3.2mm or so? 

If you have the YZ pipe or a really good pipe built for the porting, you have to be more careful, especially at higher rpm.  If using DT pipe, you're leaving a lot on the table but since the tuned pipe "supercharge effect" is less, you might be able to run more fixed timing safely.

Another thing that can happen with "pipe mismatches" is there can be an rpm range where it goes lean or the timing is too much...  like it might ping like mad at 3,000 rpm or have a lean spot or rich spot in the carburetion that can't be jetted out.  Probably not likely but I have seen it.

Also keep in mind that for your purpose you might be able to advance timing more and it will run great the way you ride it...  which on the street is likely not going to be full throttle and max rpm like on a race course.  The danger is if you suddenly decide to ride it full throttle and max rpm the timing is too much and you put a hole in the piston.