I bought it this summer at Lowe's. PTO is disengaged. When I release the brake/clutch pedal slowly, engine just stops regardless of gear (neutral/fwd/rev). What is wrong?

Check the seat switch. Check for loose or disconnected wires leading to the switch on the underside of the seat. It sounds like your mower thinks that there is no operator sitting on the seat, hence wants to shut down via the safety interlock system. That's where I'd start... good luck.