Disconnect the low oil sensor and give it a try.
Yeah, the engine should be idling at no more than 1800, often you can get them to idle well below that if you want...
Sounds like the clutch isn't letting go. With the chain off, the sprocket part of the clutch should spin freely on the crankshaft. If lubing the bushing doesn't help, take a look at the clutch shoes and the retracting spring, perhaps the spring is broken or the shoes are stuck.