To oil it just pull the bell off, put a drop of oil on your fingertip, and smear it on the bushing that the bell rides on(usually bronze in color).
As for sanding if you had a lot of glazing you'd just sand around the inside of the bell where the weights make contact.
If the bikes takes off, and the motor isn't racing, then first thing I'd do is examine that bushing. I had a bushing that went bad and did pretty much the same as you describe only it would disengage if you bumped the throttle enough. Good news if thats the case you can probably find a bushing at the hardware store that will work for a buck or three.