I think I have a good lead. It's blowing air out of the carb, I'm assuming on the compression stroke. That would explain a lot. I'm going to check the valve timing.

 

I checked the carb again and it's actually sucking in air as it should. But when I allign up the T on the flywheel, the cam timing mark is not spot on. It looks like the sprocket is advanced one tooth counterclockwise. Does anybody have instuctions on adjusting the cam timing on a YFM600?

Also, I think the backfire is coming from the exhaust stroke and it's because with a magneto, the sparkplug fires on both the exhaust and compression stroke.