That's not an air filter, that's a rev limiter 

3 Grand thats it... Sounds like a bigger issue is going on...

Because of the open engine compartment you aren't required to run the spark arrestor, but it's not a bad idea to run one.

You can try it without it on there for testing but... You need to look for a taller spark arrestor to allow more air flow.
Where did you see that you dont need a spark arrestor? Relooking at the AZ boaters guide you MUST have it on e every carb, not to mention it also says automotive type air cleaners are also a no no. If K & N makes a high flow marine im interested. If im missing something here please point me in the right direction.

i personally run one because of fear of water.  the jet, people splashing, etc it only takes one splash to ruin your motor.  K&N here inside of my scoop, hits 5k+ easily. plus it helps with the dust when towing.