Hi Katy,
My 901 Had a similar problem. It needed a really good clean which involved removing the sponge bar and all the needles, then cleaning out all the fluff from inside the needle bed. The needles needed cleaning in Surgical Spirit (not Methylated Spirit). Soak them in a jar of surgical spirit to which you have added about a teaspoon of machine oil. Leave them while you clean the machine. Vacuum out all the gunk and wipe the needle bed with a cloth dipped in surgical spirit, then wipe it over with a lightly oiled cloth. Wipe all the needles individually and replace them, making sure the latches are open as you slide them through the front channels. You might have to replace the foam on the sponge bar; you can get it on ebay. When you refit the spongebar make sure it goes in foam down on top of the needles by holding them down with the straight edge of the plastic selector tool.
At the back of the needle bed is a roller mechanism in several sections. This will probably need cleaning and regreasing at the joints. The lugs on the carriage fit into this when you set it for pattern knitting and it needs to turn smoothly. To get it working smoothly, set the carriage levers to C to lock the lugs into the roller and move the carriage back and forth across the machine. You don't need any needles out at this stage but you might need to use some oil on the joints of the roller until it feels as though it is moving freely.
Once you feel it is moving smoothly, bring out some needles and repeat the exercise. The dial to the right of the row counter should be set to the central dot and the needles should all stay in a straight line at D position each time the carriage has moved over them. If things are running smothly, now is the time to try a punchcard. To start with try it with the card lever set to the square. The punchcard will not feed through but you will be able to see if the needles are selecting properly. Then you can set the lever to the small triangle and the card should feed through on every row and you should see the needles changing position.
I hope this helps you get your machine working properly.
Regards,
Sue, January 2013