Hi rossf, and a big warm welcome to the forum. It's nice to welcome another Scott Bonnar owner. We are a friendly bunch and we all love to learn new things and tinker here.

Now to your problem. You have correctly identified your main cause. The usual adjustment is by the screw and lock-nut underneath the cutter engage handle, but if the whole clutch assembly is hard up against the engine, you will run out of adjustment.
To understand how it all works, you really should download a illustrated parts manual from the Parts and Manuals area on the main forum. Instructions for accessing the manuals area is contained in the very first post in any topic on the main forum page.It will also come in handy if you need to buy spare parts.
To fix it, undo the nut on the top of the captive cotter-pin, (the nut and bolt you can see on the clutch housing, closest to the engine) until the nut is just flush with the top of the pin itself, tap the nut and pin until it releases (ie. it moves
down and in doing so releases the clutch assy. from the
engine drive shaft.
You will need to move the clutch assy to the right (looking from the front of the machine) it will be hard to do, as you will be pushing against the clutch spring and move it to approx 1 cm or 3/8" from the engine. Re-tighten the captive cotter pin nut which will re-secure the clutch housing to the shaft. Now engage the clutch lever to see that it is pushing the clutch cone
in to enable the outer housing to move freely and no movement of the cutter shaft.
Any fine adjustment can now be achieved by the use of the screw and lock-nut, located underneath the clutch handle. you will find that the clutch cone itself, does not have to move very far to dis-engage the cutter clutch.

Rossf, once again

and I hope this has been of help.
