Starts fine and runs but why do rpms go up and down with some loss of power?

Check fuel pump output pressure.

Not sure what itnighters are, sorry.

You seem to be describing a flat spot - a hesitation during initial acceleration that is commonly caused by either insufficient spark power or the fuel system being slow to adjust to the new requirements.

A backfire is an explosion in the exhaust system and I wonder if you really meant a spit-back (through the intake), which is common with a fuelling caused flat spot?

Replacing the spark plugs is merely half the job and testing the spark power is the other half...

I suggest you check the fuel pressures and pressure regulator function and the injector spray patterns. Only if all tests good it could be worth testing the oxygen sensor...

It sounds like a lack of fuel. blocked fuel filter or lines?

What color is the smoke?
Black means running rich.
Gray or white is coolant
Blue is oil.
This shounds to me like a fuel system issue. Injectors might be bad

ITs hard to diagnose these things over the internet, it could be so many things.
Is this a gradual loss of power? If so; Im sorry to say; that it sounds like its losing compression as it warms up. It is not cost effective to repair the unit.

If the loss of power is more sudden it could be a failing ignition module. Ive even seen spark plugs that quit working when they get hot.

To test this you will need a proper spark tester, laying the spark plug against the head will not provide an accurate assesment, and a can of carb cleaner. Run the unit with the air box cover and filter removed till it fails and immediately give a shot of carb cleaner in the carb and restart. If it starts right up it could be fuel related. IF it doesnt start right up then quickly test for spark. If no spark then its likely the ignition module. If it wont run on the extra fuel and it has spark then it has probably lost compression.

clean the carb and use non ethanol gas

If it runs fine otherwise, check valve clearances and clean carby ,new spark plug, new oil, clean airfilter

this sounds like a fuel problem , clean the carbs, but replace the plugs,airfilter and oil at the same time

Replace the Fuel Pump. I had the same problem and i did everything you did to find out that it was the fuel pump. I removed the tank and repaced the fuel pump and bingo! No more problems the car runs like new

Does temp gauge go up when this happens ? When was fuel filter changed last? If not recently, I'd start there.