I have a small 850w (max) 2 stroke generator. It starts fine but when a 500w loat is plugged in, the generator revs rise up and down...rising then falling and hence the load (a floodlight) goes dim\then bright

Sounds like the control unit (that the sensor plugs into) needs to be replaced...you didn't say whether it was gas or electric...

If you know the engine's number one cylinder location, you need to put it at TDC of the compression stroke, then you lower the distributor in so that the rotor ends up pointing to the #1 spark plug wire tower on the distributor cap. As you drop it down, the gear on the dist. shaft will mesh with another gear and turn slightly. You want it ending up pointing directly to #1. Get it seated, then you can start the engine and set the timing according to specs with a timing light.

To find TDC of the compression stroke (as opposed to TDC of the exhaust stroke), pull the #1 spark plug out. Put a socket and wrench on the crankshaft pulley and turn it in its normal direction (clockwise), with your finger over the spark plug hole. As the number one piston is rising on its compression stroke, you can feel the pressure build up under your finger. You won't feel any pressure as the piston rises on the exhaust stroke, only on the compression stroke. So when you feel pressure, you know the piston is rising on its compression stroke, and you can turn the crank on around until the piston is at top of its travel-the notch on the crank pulley will now line up with the zero degrees mark on the pointer scale beside the pulley. There, TDC of compression stroke. Now drop in the distributor so the rotor tip lines up with the #1 spark plug tower on the dist. cap.

Possibally a bad thermostat or refrigerant line freezing.

Use a multimeter to measure battery voltage before and after starting. If 6V the battery voltage should rise to around 6.9V after starting, and if 12V the battery voltage should rise to around 13.8V after starting. If less than about 6.5V / 13V, the generator's not charging well enough. If less than about 6V / 12V, or if the battery voltage never rises at all, or frankly falls, after starting, then the generator's not charging at all.

Set the piston to TDC (top dead center) this is the higest point the piston will rise before moving on to the down stroke, either by lining up the marks on the crank rotor or a long screw driver (large handle so it wont fall in) down the plug hole and watch for the highest point lock or hold at this point. The cams should be fitted next on the 'compression' stroke meaing the all valves should be closed when the cams are seated (no valves being pressed by cams) generally at this point the cam lobs face away from the valves, next stroke down (ignition of fuel) valves should be closed with the exhaust cam moving round ready to rock on to the exhaust valve as the piston rises to the top again (4th stroke exhaust) as the exhaust valve lobe rocks off the intake cam lobe should be starting to rock on opening the intake valve on the down stroke of the pistion.
Trun the engine over by hand to make sure no valves are knocking the piston.
Should be as follows
1. all valve clearance free/rocking at ' TDC 1st 'down' stroke (ignition of fuel) valves closed exhaust moving round but not pressing valve ,
2. 2nd stroke 'up' exhaust valve rocking open and closing as piston tops with the intake ready to rock on as the exhaust closes and piston tops (exhaust),
3.3rd stroke 'down' (intake of fuel) as the piston moves down the intake valve should be opening.
4. 4th stroke 'up' compression of fuel all valves rocking closed as the piston rises for the compression stroke back to TDC all valves closed/rocking free.

Intake, compression , ignition and exhaust. (**** squeeze bang blow)

Set the piston to TDC (top dead center) this is the higest point the piston will rise before moving on to the down stroke, either by lining up the marks on the crank rotor or a long screw driver (large handle so it wont fall in) down the plug hole and watch for the highest point lock or hold at this point. If cam sprocket has marks line them with the cylinder head surface (sometimes the sprocket bolts) parallel.
The cams should be fitted next on the 'compression' stroke meaing the all valves should be closed when the cams are seated (no valves being pressed by cams) generally at this point the cam lobs face away from the valves , next stroke down (ignition of fuel) valves should be closed with the exhaust cam moving round ready to rock on to the exhaust valve as the piston rises to the top again (4th stroke exhaust) as the exhaust valve lobe rocks off the intake cam lobe should be starting to rock on opening the intake valve on the down stroke of the pistion.
Trun the engine over by hand to make sure no valves are knocking the piston.
Should be as follows
1. all valve clearance free/rocking at ' TDC 1st 'down' stroke (ignition of fuel) valves closed exhaust moving round but not pressing valve ,
2. 2nd stroke 'up' exhaust valve rocking open and closing as piston tops with the intake ready to rock on as the exhaust closes and piston tops (exhaust),
3.3rd stroke 'down' (intake of fuel) as the piston moves down the intake valve should be opening.
4. 4th stroke 'up' compression of fuel all valves rocking closed as the piston rises for the compression stroke back to TDC all valves closed/rocking free.

Intake, compression , ignition and exhaust. (**** squeeze bang blow)

mcdevito75 here, The temperature riseing to max the cooling off fast, could be a stuck thermostat of the fan switch for the radiator could be faulty. The hard start after a few hours could be a dirty gas filter. Bset Bet, have your local auto repair shop have a llok.

Check the cooling liquid qty. I feel engine piston is seizing. Replace the engine coolant as per the manufacture's recommendation.

The 1 to 12 marks are the rise of the roof pitch in 12 feet. 1 would be 1 foot rise in 12 feet, 2 would be a 2 foot rise in 12 feet and so on to the max of 12 foot rise in 12 feet.

Depending on the range of rise and fall, this is completely normal. Oil thins out as it gets hot so you will notice the pressure drop significantly at hot idle. A typical value would be 20psi, then as the engine revs up, the pump creates more pressure because it can now keep up with and exceed the leak-down or bleed-off from the bearings. The maximum pressure would be limited by the relief valve in the oil pump which could typically be as high as 60psi.