Shop manual setting for the air screw is 1 turn back from fully in. Look under "manuals/articles" then "manuals" then "service manuals" for the BS90 shop manual, it's got a good section on setting up the carb, starts on page 39.
It sounds like the leak is at the connection between the exhaust pipe and the cylinder. Three possibilities:
1. Most likely, the clamp nut that attaches the pipe to the cylinder is just a bit loose. Tighten it a bit and see if the leak stops.
2. The gasket is bad, if so, replace it.
3. The pipe flange is cracked. If neither of the above fixes the problem, disassemble and look for cracks where the flange meets the pipe. Very careful welding can save a pipe, or replace it.
You can tighten the clamp nut with a hammer and punch, but that'll bang up the nut and looks a bit ugly when done. Better to make or find a special tool made for the job. I made one like the picture below using a hack saw and file on a piece of 1/4" steel (3/16" would have been better) Works much better than the punch and hammer approach!
