Whoa! 7 - 8 psi will blow the float right out of a Holley carb. It is supposed to be 2 psi tops.

Check your voltage at idle and 1200 RPM, it sounds like the VR is shot all right. But it could be the gen too. There is a way to put the gen in "full generating" mode with a jumper, but I don't remember how. If you pull the cover on the VR, look for burned points or wires, broken solder, etc. If you remove the VR, look on the back, there are two wire-wound resistors that can smoke off -- it will be fairly obvious if they have.