A bit more research and I think I have answered my own question.
The shaft I am referring to is the shaft that has the 12 tooth sprocket on the end. There is a discussion in the technical section about a model 45 clutch balance device where the issue of alignment is raised. I may be wrong (generally am) but I am pretty sure that the shaft is supported at the clutch end as it fits in the bore of the thrust gearing. I realise this bearing has some radial play but it still holds the shaft captive while also allowing a little movement so that minor misalignment would not be too much of a problem.
I believe that if the clutch is in good condition and adjusted correctly around 8-10 mm of the shaft will supported by the inner race of the thrust bearing.
In an attempt to try and align the engine I now do the following. Firstly I totally agree that the bearing adjacent to the sprocket should be self aligning, Prior to fitting any of the clutch components I sit the engine on the frame (engine pto shaft needs to be 3/4", 5/8" engine shafts would need a temporary 3/4" OD bush fitted) I loosely fit the engine mounting bolts and then clamp a vee block to both shafts. If the engine is happy to sit flat on the frame when the shafts are clamped in the vee block the alignment should be pretty good, I then tighten the bolts.
I fabricated a simple 90 degree jig that clamps to the frame that has screws that are adjusted until they locate on two faces of the crankcase near the mounting bolts. I then remove the engine, fit the clutch , locate the engine in the jig and hopefully it should be aligned fairly closely.
