2.5 is way too lean and it will get hot. Break in setting is 4 turns out, so I would probably start at 3.75 turns out on the top. The bottom should be flush with the body (not the arm, the body). I don't see the glow plug being an issue anymore but the fuel may be an issue. I have never used Traxxas fuel. I'm an O'Donnel fan and used it a LOT when I was racing. However, Blue Thunder Sport Formula is made for these trucks (RTR) and is what I used in all of my videos on the Traxxas trucks. But, lets say the fuel is okay as it should be.
When you have the igniter on the plug, it's glowing almost white hot. But once you remove it, it requires the engine to run hot enough to keep it lit. If it's pulling in too much fuel, it will cool it off way too fast. This would indicate a rich condition. Again, I would start at 3.75 turns out and try it. If that doesn't work, lean it out 1 hour (look at a clock) and do it again. What ever you do, don't go more than 1/2 turn from 3.75 out (3.25 min). This is almost to the point to where I would have to look at it if the needle settings are not the issue.
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By the way, you may have this already, but here is the page from Traxxas.
http://traxxas.com/node/50983