Both of you guys, there is no bearings, bearing holder or spindle used on that engine, the cup you see in the photos is dragged by pawls in the blower housing, its a much newer design than those using the ratchet type mechanism.
Since there is no contact between starter reel and flywheel side of things while the engine is running it only leaves a few possibilities, I think either the mesh around the starter cup is hitting the blower housing or the start cup is making contact with the bottom of the starter from being mounted too high.
This engine has had a few tennants improvements already, going by the flywheel on it, it would have originally had a vertical pull side mounted starter.
