It could be that the K&N you have in there is pulling too much air at high RPM which would mean you would have to go maybe another jet size up. Maybe 115's or 117.5's. To test this theory, pop in the stock filter which flows less air and try high RPM's again. Remember the Bandit gets max horsepower at round 8,500 or so so revving much past that just is less power. I always am amused by people on youtube who rev to redline then shift, it's actually less acceleration then just sticking in the power band. Remember the Bandit's stock cams are made for mid-range power not top end.
For fun Octane pop in the stock filter, ignore any low end richness for now and try it. If the power is better it may be worth it to tune the bike with the stock filter on there. It wouldn't be hard, you may just have to turn the mixture screws in a 1/4 turn or 1 or 2 less shims on the needle is all, it would be close without any adjusting. Or maybe enlarge the top hole, take out the snorkle, etc. The stock filter also stops dirt better so you would have to change the oil less. I would guess that without the back of the airbox on there, since the power is almost the same as the pods it would actually be close to the 147.5 to 150's you use with the pods. The bonus of the airbox version is it may be a little bit better in wet weather which would be good for me because the bike is my primary vehicle.
I think the pods would probably be "ok" in wet weather as long as you were moving but the outside cylinders would still be a bit richer with wider throttle openings in the wet and if you parked the right side might get a little more rain than the left. The good thing is that the bandit's side cover almost cover the entire airbox intake boots right up to the carb so the Bandit is probably better than most other bikes with pods in wet weather. At least the gen 2 bikes anyway. That's why I would recommend using the side covers with the pods.
Try the stock filter thing first as it's the easiest and easily reversible. Also since this bike cam profile is for mid-range power I would shift around 9,500 rpm max without more aggressive cams. This bike has got an awesome mid-range so get out there and use it!!! :-)
If you wanted to experiment with your own "poor mans stage 2 airbox mod" maybe for fun maybe either buy another airbox lid or if you wanted just tape the edges of the K&N filter in there temporarily and try say 140's or 137.5's(just a guess) or something and see what that gives you. The good thing is your like an expert now on reading the plugs so an hours ride in varying traffic, high speed, low speed etc. you can look at the plugs and see if you need to go up or down. You may actually have to go one up on the pilots if you're over 4.5 turns on the mixture screws. Focus on the high speed as you're seeing if new mains will help. I believe you also take out the internal metal screen inside the airbox that the filter sits on but I wouldn't do that until your confident your very close with whatever you use with just taping the edges of the filter in there without the airbox lid. That way if it goes to hell you could always just switch back to the 112.5's and the airbox lid.
I don't know what the exact numbers are but you should get another few horses up top and I believe max power is attained around 9,000 which is a little higher. If you really want to go jihad get yourself some GSXR750 or GSXR1100 cams which moves max power up further and you get a huge increase in top end power however down low and mid range suffers a bit. The max you can get is around 120 horses without any engine work(no cams, porting, etc) which is pretty respectable. Since you already have the slip on you just need the stepped headers and voila you have a full system and some pods and there you go, plus as a bonus you keep the awsome mid-range and alot of the low end power.
Once you add the cams you get another 12-16 over that but mid-range and low-end suffers so probably total with both intake and exhaust cams plus a stage 2 with full system is around 135 or so. If you wanted to keep most if not all of the mid range you could just install the intake cam only and that would get you around 126 horsepower or so. So there are lots of options so go crazy experimenting if you like.
For me since I do alot of city traffic stage 1 is fine or maybe stage 2 airbox mod would be the max I would go for now. As soon as you put a stage 2 with pods on there you lose a little mid-range, well you don't actually "lose" mid-range but the mid-range power comes on later in the rpm range, but for around town I won't be running around at 5000 rpm just putting down the street or in traffic so I like that there is more power sooner at the cost of top end which is rarely used on the street. Also the advancer helps the power come on faster so it may be worth your while to buy one from Dale at holeshot. I didn't even drain the oil I just put it on the kick stand so the oil is on the left side of the bike, put a tinfoil pan underneath the timing cover to catch any drips and popped on the new one in like 15 mins.
If you want to know really quickly if you need more juice up top turn the mixture screws out to 4.5 turns, this will increase the overall jetting. Ignore the low speed as it will be rich as hell. But if you turn out the mixture screws and suddenly you have more power up top, you would probably need to go one up on the jets, or alternatively pop in the stock filter. Then when you're done experimenting turn the mixture screws back down to the 4 you have on there now otherwise it will drive like crap below 3000 rpm. If you richen it out temporarily and it drives worse, then you know you are too rich and then try taking out the snorkel temporarily and see if that helps.
When my bike was super rich it was acting like it was lean when hot, lower power, mushy throttle, etc. Since I leaned it out it was wheelie city. Theoretically you could be slightly rich, looking at your plugs there is some sooty deposits on the base ring and the tips of the plugs when you had it at 4.25 turns out. I know you said you turned in the mixture screws to 4 and it cleaned it up a bit. Maybe it needs another 1/4 turn in. Temporarily turning out and turning in the mixture screws will adjust the jetting over the entire range so you can tell if it needs more air or more jet. Just remember that the pilots mostly control the low range so if you turn them out to say to 4.5 and down low drives like crap but top end is awsome then you know you will need to richen out the bike. Turn them back afterwards to where they are supposed to be and go up a main jet size, try not to be tempted to compensate for a rich/lean mainjet with the pilots as it throws the jetting off all over.
Just looking again at your plugs I would say your slightly rich rather than lean and most of it seems down low so for fun go to 3.75 and see if it gives you a little more oomph. Since your in Northern Australia it's probably a tropical or sub-tropical climate so it doesn't need as much jet as colder climes. This helped me. I started the bike cold on the centre stand(keeps the fuel level in the bowls) and let it sit there warming up. As it was warming up I was revving it once and a while noting if the throttle response was getting better or worse. When it was super rich, I was noticing that as it was warming up the throttle response was getting mushier and mushier so I knew I was too rich. This is a good way to do it because your not driving it around and you can concentrate entirely on how the bike is responding to throttle inputs. This gives you an idea of the general jetting, it mostly helps with your pilot and needle settings as your going from a low rpm and revving to a higher which is controlled mostly by needle and pilot. Good luck and tell us how it's going!
