Okay, before you snug up the nut/bolt combo that holds the arm onto the governor shaft are you:
1. Making sure that the governor shaft is turned as far counter-clockwise as it can go?
2. Pulling the governor arm counter-clockwise as well while it is connected to the throttle (so that the throttle is pulled wide open)?
As you hold all that stuff in that fully counter-clockwise position, you need to snug up that arm bolt so that the arm stays on its proper spot on the cross shaft. This is quite challenging, particularly with the engine in place on the tractor and the hood supports in place... Not to mention that it requires having a third arm in order to work best...
The deal is that the governor arm/shaft only moves far enough counter-clockwise to open the throttle fully (about maybe an 8th of rotation...). Without the governor arm installed you can kinda "thunk" it back and forth through this travel. When the engine is idling and not under load, the governor spring (which sits in behind that circular arm piece), keeps the governor arm sitting with the throttle closed. As you speed up the tractor, the throttle linkage pulls on the little arm that mounts up behind that circular piece, pushing the spring and governor arm counterclockwise, speeding up the engine. Inside the engine, another arm connected to the back end of the governor shaft rests against a set of hinged weights mounted on a gear that is connected to the camshaft. As load is applied to the engine/rpm increases , the weights attached to the governor gear swing out, pushing against the inside arm, moving the governor shaft and the arm on the outside counter-clockwise, opening the throttle. The spring works to keep the governor/throttle closed, the governor gear/weights push against that to open the throttle when needed. Is all kinda neat, when you can get it to work...