I have the same Microlite 2.5K LP
Last month I couldn't get the gen to run without hunting badly under no load, and when load applied it seemed to struggle. It only has 175 hours on it.
I found it was running lean.....carb spray while hunting cured it for 20 seconds.
I ended up pulling the demand regulator on the gen (Garretson SD regulator) and got a rebuild kit for ~$50 instead of ~$300 for a reg.
Started right up, no hunting, no dying, works great under load, holds rpms and HZ after small adjustment (I had tweaked it previously).
I probably saved about $600 doing it myself.
Edit, I just noticed the part about the spark not visible.
Sounds like either the coil or a crank pickup sensor is breaking down when hot.