Sounds to me like what happened to my 327 when the governor failed. You could look down the carb and open the throttle all the way, could even see the blades move, yet the engine would just idle. Back in the '70s, Dad's truck (same year C60 just a flatbed vs a bus) did the same thing and he just bypassed the governor. Then it ran fine. I think I did the same thing, and installed an HEI distributor while I was at it because even back then (early 1990s), SBC HEI distributors were a dime a dozen and it was no thing to bypass the resistor wire. Then I swapped in a Cadillac V8, however if my bus had come with the 348 or 409, I would have rebuilt that instead.
These older governors are vacuum actuated, the throttle linkage from the peddle to the carburetor does not "open" the throttle blades, a spring inside the diaphragm housing opens the throttle blades, the peddle linkage allows the spring to act on the throttle shaft. With the engine not running, the throttle shaft/blades are allowed to open fully with movement from the peddle. With vacuum applied to the diaphragm, the spring tension has to be greater than the diaphragm pressure in order for the throttle to open. If the engine speed reaches the set point of 4000 RPM, the centrifugal valve on the distributor shaft will close and allow vacuum to pull the diaphragm against the spring tension and limit the amount of throttle opening. Under a heavy load with little vacuum, the throttle shaft is allowed to be opened by the spring tension, as the engine gains speed and the load is reduced due the engine making horsepower and torque, the vacuum will rise and the centrifugal valve will come into play and allow vacuum to act on the diaphragm. The governor is designed to limit the RPM of the engine so as not to scatter the engine-that is its sole purpose. In the case of the OP, I don't think the governor is the issue UNLESS there is a vacuum leak in the system.
