What you are saying there sounds like whats happening, I told the plug out and there was alot of fuel in there, I put a rag over and pulled the cord to clear it. Popped the plug back in and off it went. I noticed a rubber bung on what I think is the crank case. Should I put oil in there ? Should I be oiling it anywhere ?
Not sure what "rubber bung" your talking about. If your talking about the purple accordion thing, no. That's your throttle slide. It gets all the lube it needs from the fuel going through it.
These engines are quite a bit different than normal 2 cycle engines. Normal 2 cycle engines have rings on the piston which create the seal for compression. These engines rely solely on a tapered sleeve that actually gets narrower as the piston goes up the stroke. When hot, the sleeve expands just a little to releive the mechanical "pinch" enough to where you get compression without grinding down the piston. When the engines are cold, the piston essentially grinds down and eventually wears so much that when the engine warms up, the combustion pressure leaks past the piston causing poor running, stalling, bad tune, power loss, etc.
When the engine gets flooded, the crankcase below and above the piston get filled with fuel, so the piston can't go up/down and becomes hydrolocked. Running overly rich can cause this or over priming can cause it.
As for "oiling" anything, there's an "after run" oil that can be used if you intend on letting the engine sit for more than a week or so without being used. With that, you put a couple drops down the carb and in the glow plug hole, then turn the engine over a few times without the heater on it. That's the only extra oiling you should do with these.
After run oil:
http://www.hobbypeople.net/hobbico-after-run-engine-oil-2oz.html?gclid=CPGe4pP3kMoCFQmOaQod4s0J8A
Whenever you shut down the engine for the day, you should rotate the flywheel so the piston is at the bottom of the stroke. This, in theory, will help prolong the engines life by not causing excess wear I talked about up above and will allow things to shrink properly when the engine cools.