IAC is (idle air control) on this engine it is adjusted manually. The part you circled in the post above is your idle air control. If you look at the parts manual under intake 2, part #40 is the idle speed adjustment screw. If you turn this and the idle speed does not change something else is wrong. It also has a high idle thermowax device on the other side of the IAC. It may be stuck and allowing to much air into the engine at idle when at operating temp. If that is the case the whole IAC will need to be replaced, they don't sell the thermowax separately. The 4 brass screws on the top of the IAC are for your throttle body sync, just FYI. There is no part number for the complete IAC in the parts manual.
This is from a FZ1 forum, same thermowax unit as this sled. Unfortunately the pics are no longer there.
"The thermowax unit has one job and that's to let more air into the motor when cold and press the idle air linkage assembly to an operating temperature position when hot. It's also the device that the idle screw threads in to provide the right linkage distance for the proper idle speed. Unfortunately, if this part fails, it can cause the bike bike's RPMs to hang/take a long time to return to normal when you shut the throttle, never return to a normal idle even when hot and/or make the idle screw do absolutely nothing.
I've devised a 1 cent solution to thermowax failure.
Disassemble your thermowax unit. Remove the 19x3mm rod from the assembly (put it in your toolbox somewhere), place Abraham Lincoln above the piston, reassemble as shown.
What this does is basically force your thermowax unit to be in the 'warmed up' position 100% of the time. It will disable fast idle entirely, but if you're having drivability issues... it's better to have the bike take a bit longer to warm up than be stuck at a near 3500+ idle. You could use this as a permanent solution if you're cheap/don't want the down time while you're waiting for a replacement.... but you will take slightly longer to warm up on cold starts/not idle as well during that time."