The needle's position has nothing to do with your air problem.
It sounds like the air valve is stuck. Did thinner or paint possibly get down the needle tube and make it's way into the air valve? It sounds like that may have happened and you may need to replace the air valve assembly if cleaning it doesn't work. It only consists of five parts, and can be seen in this photo as part numbers 30, 31, 32, 33, and 34.
It's not that expensive of a part and sells for $5.50 from Dixie Art for example.
Do you have an airbrush shop nearby that may have the parts?
Mike
“Wisdom is the right use of knowledge. To know is not
to be wise. Many men know a great deal, and are all the greater fools
for it. There is no fool so great a fool as a knowing fool. But to know
how to use knowledge is to have wisdom. " Charles Spurgeon