clutch won't ingage fully

Sounds like you have a grasp on the way things work, but I'll ask anyway. When you pulled the clutch cover was everything pretty clean or was it it all gooey and gummy in there?
 
did you check that the tube part of flower nut isn't hitting the end of the shaft (look for scrape marks at inside end) - this can often be fixed by putting pressure plate across top of vise and then put a socket on top of plate to smack it hard with a big hammer

end result will be a bit more dome in middle of plate to move flower nut out away from shaft
 
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Make certain the clutch cable is tight enough to pull the arm far enough back to disengage the clutch. If it's slipping when engaged, check the clutch plate and the pads to make sure they are clean of grease and oil.
 
The first thing I would try is to take the entire sprocket cover, with the clutch arm, off, and take out the piece that goes in the hole that actually engages the clutch. See if it works like that, if it grabs (you just won't be able to release the clutch in this state) then the problem is in your linkage, it's the cable or the arm out of adjustment, somehow. But if it still slips, than the problem is the clutch itself. Process of elimination is the only sure way of diagnosis.

And here is one more thing. When I first got my engine, I seen some guy on youtube complain that the screw that holds the pinion gear on was loose on his from the factory. So I checked mine, and sure enough, it was loose, too, almost to the point of falling out. In fact, when I took the cover off, it did fall out. I don't think there is a Mandarin word for "loctite".
 
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