Actually it would have better flow over bolting the carb directly to the head. The carb's outlet is a round hole and the head's intake port is a D-shape. The insulator provides a smoother transition from this round hole to the D-shape, therefore reducing turbulence and increasing flow capability.
The main reason for using the insulator in this case is to allow the bowl vent a passage to atmosphere. If you look at the face of the OUTLET on your carb, there is a tiny hole at the 10:00 position. This hole allows air to enter and escape the fuel bowl as it fills and emptys. Without this vent, an air bubble would get trapped in the bowl that would keep the float from rising and shutting off fuel flow.
If you look at the carburator side of the insulator, there is a little snail-like passage that goes around the intake port. This passage, along with the matching passage in the carburator face itself, and the little extra hole in the gasket between the carb and insulator, allow the bowl to vent.
Now your problem isn't that this vent is blocked because the snail passage in the face of the carb is sufficient enough to provide the venting. Your problem is that this vent is now not only open to atmosphere (like it should be), but that it is also open to intake vacuum. What is happening is that the intake port and the snail passage on the face of the carb are overlapping, causing this "short circuit." When you try to start the engine, the engine is drawing air through the snail passage instead of through the idle circuit, therefore it is not getting fuel hence the reason it starts on ether. Once it gets running on ether, it still has the intake leak through the snail passage but now it is sucking on that bowl vent. The vacuum on that vent is sucking massive amounts of fuel into the engine, fouling the spark plug and killing the engine in that two seconds that it ran.
The solution is to dig that insulator out of the garbage and reinstall it.
I also encourage you to look at these parts for yourself and figure out how they work. Maybe even disassemble an old carb and spend a day shooting carb cleaner through all the holes to see where they go. WEAR SAFETY GLASSES IF YOU USE CARB CLEANER!!!