STRICK,
HOLY SMOKES!!! Sounds pretty bad!! The condition you describe is definately heat related. Be sure and check the crank seals, timing, possibly the ignition box, etc. I know that KTM has had ignition problems in the past, but they would generally cause hard starting or just quit. Check anything that would possibly cause the lean-out condition, carburetion, intake boot, etc.
Also, something that we have had trouble with, is the gas and oil separating in the cold weather. We use Maxima 927 & Super M, and the 927 Castor separates in cold weather.
Just have to make sure to keep the fuel mixed good. I don't know why I'm telling you this,,,You guys probably don't have much of this cold stuff in Nevada!!
I hope you find the problem, and get the KATOOM back together soon!!
Good Luck,,,, Again
Motowrench