If you turn the lights on with nothing running then you will show discharge. What happens when you turn on the lights at idle? discharge? At idle your not going to be putting out much amperage wise at all. when you increase rpms you should show increase in charge rate but not pegging out the needle. I would be worried about the full charge if in fact that is what it is doing. I would want to know how many amps you are putting out when you turn up the rpms and the needle goes all the way over. AMPS, not voltage. You may have to go to a local starter shop for this test. Typically I would say bad voltage regulator.....is it a good USA brand or made in India? I have seen generator armatures do funny things as well and that would be my next guess even though you have had it tested. I have listed a few things below that you can try. What about your battery? They can do some weird things as well and if you have another around that is charged swap them out and see what happens.
Here are some steps to take.
1. Check battery water and general battery condition to
see if it will take and hold a charge....Load testing
may be necessary.
2. Check wiring for damage and make sure all
connections at generator, regulator and battery are
tight and free of corrosion.
3. Make sure fan belt is tight enough to drive
generator at full capacity.
4. Run engine at medium speed. Using a wire, touch one
end to regulator base and other end to a good ground.
If this corrects trouble, regulator is not properly
grounded anymore.
5. If test 4 does not correct trouble, make this test.
Connect a wire from regulator terminal marked "ARM" or
"GEN" to regulator terminal marked "BAT" with engine
running at medium speed. If charging rate increases,
replace old regulator.
6. If test 5 does not correct trouble, make this test.
Connect a wire from "FLD" Terminal of regulator to a
good ground with engine running at medium speed. If
Charging rate increases, replace old regulator.
If none of the above test show a bad regulator then
there is probably a problem in the generator itself.