Exactly. That would explain the fuel smell and thinning of the oil. But there is another thing you should have a look at:
The XR125 (at least the models that I know) has a centrifugal oil filter underneath the right side engine cover. It actually works surprisingly well and collects most of the...
please send me your number. I also have a good 2nd hand wheel in stock. It will be less expensive.
The stock spokes tend to rust solid onto the nipples on those bikes. I doubt that you can transplant them...
I would also check swing arm and linkage bearings. They could be rusted or worn. That results in a lot of friction that can feel like a "stiff" spring.
I have brand new Heavy Duty rear wheel for sale
Consisting of
18x2.5“ Excel rim
Stainless steel Haan spokes
As new original KTM rear hub
Should work on KTM
690
790
890
950
990
1090
1290
And similar Husqvarna models.
Just send me a message if you are interested.