The float level keeps enough fuel in the bowl to feed the engine. So, the only way for it to impact the engine is if the level is too low, which could serve to starve the engine of fuel in conditions where the engine is demanding lots of it. That would be pretty much WOT at high loads, like when you're trying to maintain 100mph, or up hill into a huge headwind.
I did measure the float level once, using a clear piece of plastic tubing attached to the drain and curled up towards the top of the carb. It was spot-on and didn't need to be adjusted.The fuel level should be sitting a bit higher that the joint between the carb body and the bowl.
There was a time when floats would leak (brass) or would soak up fuel and sink (plastic), but I haven't run into an issue like that in ages.
A more likely cause of incorrect level in the bowl, on the KLR, is a failure of the vacuum petcock - it won't flow fully and can't keep the bowl full. unfortunately, you can't see that with a float level inspection, as the bowl will fill to the correct level when the engine is off.
A maximum? There is usually a tolerance on the setting, but there's nothing to be gained by setting the float level higher.
I like your method of checking the float level. The manual shows to have the carburetor off the engine, bowl removed, and turned upside down. The measurement should be 17.5 mm. The adjustment is made my bending a tab that rests on the float valve. This is what I attempted a couple of months ago.
-The carburetor was removed from the engine.
-Measured the float height at 15.5 mm.
-Removed and bent the float adjustment tab (many times) until it was close to 17.5 mm.
-End result was the static float level was correct though the tab put enough pressure on the float valve that it closed the flow of fuel.
Is this the correct method to set the float level. If so, why did I run into the float valve problem?
I like your method of measuring the float level. What fitting did you use to replace the drain screw? What exterior mark on the carburetor did you use to check the float level?
"vacuum petcock" I can't find this in the Clymers manual.