NEED TO KNOW FLOAT LEVEL HIGHT. REPLACED FLOAT AND NEEDS LEVEL ADJUSTED. FUEL OVER FLOWING WHEN BIKE RUNNING.

The float needle has jelled fuel holding it open, rust from your tank is holding the float needle open, The float needle tip is damaged, or you have a sunk float. Take apart clean and inspect your carburetor. Replace any worn or damaged parts.

The float needle is not stopping the fuel flow. This is what you suspected. Why not is the question. Three things can cause the problem. 1 ) There is trash from the gas tank stopping the needle from closing; get an inline fuel filter and flush the tank. 2 ) The float tang needs to be adjusted to shut off the gas sooner, before the carb fills too full. 3 ) The float is leaking and no longer floats as it should. If it doesn't float there is no way the needle will close. By the way, there should not be any oil in the gas. Are you certain this is the case? If so, the oil would have to be coming from the crankcase breather. Check the oil level in the gearbox. Chances are that compression is getting past the rings and the fuel in the air / gas compressed mixture is mixing with the gear oil and raising the level in the box.

it may be due to a few things like:
1. The needle valve or its seat is worn. You have to change it as a set. This involves opening up the carb.
2. There may be some debris or varnish between the mating surface of the needle valve and seat which also requires opening up the carb and cleaning with carb cleaner.
3. You carb float level setting may be incorrect. You have to know the float height from the manual and then have it adjusted. There is usually a small metal under the float which is used for float height adjustment.
4. Your carb float may be stuck and this usually happens when the bike is on its side stand and not used for a long time.

The float is stuck open by some trash at the float needle OR the float is bad and literally does not float any more. Remove the float bowl and clean the carb using spray carb cleaner. Turn the gas on and it should start to flow. Now gently lift the float upward and the gas should stop flowing. Turn off the gas and put the float bowl back in place. Below is a generic carb diagram. Please take a moment and rate my answer.

There could be debris in the float bowl preventing the float valve from closing. If this is the case it is likely this debris may get into other passages / circuits within the carb. Or the float has become full of fuel itself and cannot exert enough pressure on the valve to stop the flow of fuel. Also the float level has to be at the proper height to meter the fuel at the proper rate of flow for the engine in all conditions. Too low and the bike will starve for fuel before the valve can respond....to high and it'll pour out as your friend's is doing.
Drop the bowl off the carb and check to see if the float is full of fuel or there is any sign of debris in the bowl. Any sign of crud in the bowl and I would suggest cleaning the carb. You may be able the clear things enough to get the fuel to stop flowing by messing about but may have trouble down the road shortly if you don't get it all **** and span.
Do some more research into cleaning the carb as there are some parts you need to be careful of exposing to chemicals like solvents and cleaners...the rubber tip on the needle valve on the float. Basic rule is don't soak any plastic or rubber bits in any nasty chemicals. Same goes for you...lol...
You can check the float level without removing the carb by shutting of the gas and draining the float bowl. Take a short piece of clear tubing (8 inches or so) and slip it over the nipple where the drain screw was. Hold the tubing alongside the carb / bowl body so the open end is up and above the level the fuel should come to. Mark a small line on the tubing say 1/4" above the join between carb bowl and body. Turn on the fuel and observe the fuel flowing into tube....once it stops carefully lower the tube until the line you made is even with the split between bowl and body. The fuel shold stop flowing just before the top of the bowl....measure between your line and the fuel level....in your case the fuel may well just keep climbing out the tube as it seems you have issues there. After you get it sorted out this info is more useful.

Air screw setting = 1 1/2 turns Float height = 15 - 17 mm Fuel level = 0 - 2 mm below edge of bowl.

Two possibilities.
1. Your float needle is leaking (most likely). Remove the carb, remove the float bowl. You will see the float itself and it has a tang that touches the float needle. Remove the float and inspect the needle and its seat for dirt or wear. You could try gently tapping the float bowl first, as this may dislodge and dirt, but thats a short term solution.
2. The float level is incorrect. You will need to bend the float tang to adjust. However, find out the float height for your bike first.

fuel level sensor is a sensor in the fuel sending unit in the gas tank. The float like lever is likely stuck or leaking and needs to be replaced.

give your carb a tap at the bottom may be a stuck float is that dont work strip the carb and check the float and float needle and float hight make sure you dont leave the fuelon wen the engine isnt running

Needle or seat damaged. Fuel in air box ? Would be wise to make sure crank case isn't filled with gas... you may not want to star it.

gas leaking out of the overflow tube is definately a float or float tang problem. if you are sure the tang on the float is adjusted probably, then the float may have a hole in it and it is no longer "floating" to shut off the supply of fuel. i'd remove it and submerge it in gas for a bit and look for air bubbles escaping and also see if it no longer floats after you release it from being submerged. if either happens, then replace the float.

running rich is an improperly adjusted air screw, wrong setting on the jet needle (long needle attached to the carb slide with a circlip), clogged airfilter or wrong jet (main or pilot) size. i'd try to find out the settings for these items and adjust accordingly.

hope you get it all sorted out and get this classic back on the road!