Sure sounds like it. Getting rid of the settling bulb will make the problem worse, in my opinion -- all the sediment would then go into the in line filter plugging it solid, or worse yet into your carb.
I'd pull the tank, ball mill it and have it coated with epoxy (most radiatior shops can do this) and then re-install the original fuel system. Settling bulbs rule when it comes to water, and you can see how much dirt you're dealing with before major problems occur.
Just my $ 0.02,
Pete P.
Harborcreek, Penna.