Welcome to the forum Ken! The mower is designed most likely for the 500+ rpm setting, however, you could use the 1000 rpm setting with reduced engine speed to conserve fuel.
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Is the low PTO speed 500 or 540 rpm which is a std?
Not that I'm advocating the use of only the 5x0 rpm but The use of the 1000 rpm will most likely not save on fuel. The only potential savings would be from reduced load on the engine from frictional losses and losses in the alt and water pump between the 2 different engine speeds. The other side is you might even use more fuel depending upon where on the torque curve you are and what the slope of the curve is. Engines are most fuel efficient at peak torque.
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If the PTO is a dual speed model, sometimes you need an adapter, and sometimes you remove the PTO shaft and flip it around and reinsert it (JD does the latter). My 574, 766 and 1066 have two PTO shafts, one for each speed. The shafts are different to keep people from hooking the implement to the wrong speed shaft. Running a 540 unit at 1000 RPM can be dangerous and will likely damage the machine. The 540 shaft is coarse splined, and the 1000 shaft is very fine splined.
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The Woods RM 42 I have says to use the second speed on a Satoh Beaver, which has a 3 speed PTO. I have to install a PTO conversion unit to make the PTO turn the proper direction and provide a 1 3/8" splined shaft commonly used with 540 rpm PTOs. Usually, the 540 rpm speed doesn't provide enough momentum to work well with small HP tractors, they need more momentum to keep things cutting.
BTW, the Satoh Beaver is only 15 HP, which should be similar to the Iseki's HP rating.