FIX THE LEAK IN THE FUEL PICKUP LINE. IT MAY BE INSIDE THE FUEL TANK.
If you have to bleed air then there is a leak or you are running out of fuel. Whenever the engine is turning there should be a vacuum in the fuel pump. That's how it sucks up the fuel. Go figure.
After you fix that, check the fuel stop setting of the governor. If the engine has been worked on be someone not familiar with generators the speed may have been set with the fuel stop adjustment rather than the speed adjustment. That will result in the engine pulling down under load.
No load speed should be set 3% above nominal frequency.

Bill
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"Why not the best?"
Jimmy Carter

Thanks for the reply. I have a new external fuel tank fitted with a new fuel takeup pipe. The generator was working ok last week onthe same job. Should the generator be able to handle the running of such a granulator when the required power draw isn't as constant as it would be if we were just running an office from it? I am a little worried that our granulator requirements could have damaged the electrical system on the generator in some way. Although I did take advice before hand about our requirements and was told that a 220kva would be ok.

How much is the generator hunting. 3% from no load to full load is quite normal.
Is the engine "making oil"? You may have a damaged diaphragm in the engine mounted fuel pump. A symptom of a damaged diaphragm may be fuel in the crank case and an increasing oil level. But not always.

Bill
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"Why not the best?"
Jimmy Carter

There is no difference in the oil level or any change in it's look. It is hunting a considerable amount and at times it slows the machine down so much that I expect it to stop. Eventually it just seems to try to hard, slows right down to below a certain level and stops completly. There are warning lights on the stater control to indicate fast/ slow running etc but nothing out of the ordinary is ever indicated.

If the slow down is proportional to the increased load, that may indicate that the fuel stop has been tampered with.
Erratic slow downs that I have encountered are usually fuel related. Have the fuel filters been changed lately?
An anecdote; A worker filled the fuel tank on a small diesel generator with fuel from a tank with a lot of standing water.
He got a couple of quarts of water into the fuel tank. The filter plugged and the set stopped. He correctly diagnosed the problem as a plugged fuel filter and changed the filter. The fuel pickup was still sucking water. The new filter plugged up immediately. He had just changed the filter so he "knew" that the filter was good. He then suspected the oil pressure switch and destroyed it. The over temp was the next to go. I forget what all was on the set, but he managed to destroy everything, including the remote start. Finally he found the water, cleaned the tank, changed the filter and started the set. In the next few months it turned out that the safety stops were not needed. An oil line broke.No problem, the set eventually stopped on its own. Over temp, stopped on it's own. Another oil leak, no problem it'll stop.
When the set could not be started at all, it was sent to the dealer for repairs.
The dealer evaluated the damages and then asked what our tax situation was. The repairs would cost $4600. If we were not in a position to write the repairs of against taxes a new motor could be supplied for $4000.
The moral is; Just because you have changed a filter, the fuel may be still contaminated.
This really sounds like a fuel related problem. But the motor may be failing, or you may have a cable going bad.
If you have an ammeter, see if the amps are going up above the rated output of the set when it slows down.  

Bill
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"Why not the best?"
Jimmy Carter

Brand new fuel tank with 2000ltr of diesel straight from the supplier. Nearly new fuel filters too but I will change them again. The sediment/water trap filter is clean and clear with no water or dirt. We have also had all the fuel pipes off today and blwn them through just in case there was some dirt in them but they were all spotless. The amp meter on the generator shows the granulator drawing about 50 to 60 amps and nothing more when the hunting occurs. It should do over 100 constantly without any problems. This issue is happening when it is under very little load. I haven't put a much larger load on Since it stopped a couple of times when there was plenty of material in the granulator and before I noticed the hunting issue because there is no need. It will stop. Each time it stops when there is material in the granulator it takes about half hour to clear it and start again so when the generator starts stopping every 15 mins you can see my dilema. It is safe to say that the amp draw during the problem is fairly minimal for this machine.  

A couple of questions;
I don't think that you have told us the voltage or frequency yet
What make of engine is driving the generator?
What type of governor? Mechanical, Electronic?
By the way, if it's electronic, check the wiring to the induction pickup on the bell housing near the flywheel.
I have had connectors go bad. A loose or out of adjustment proximity pick-up may cause strange actions.

Bill
--------------------
"Why not the best?"
Jimmy Carter

It most likely has an electronic governor.

I would check the stabilty gain first and then the magnetic pickup for metal filings.

Then I would troubleshoot the governor controller and actuator.   Assuming all wire terminations are secure.