I tried moving the engagement cable spring from the 38" hole to the 42" hole next to the pulley. It now cuts wet cape weed without slipping. I will try it tomorrow without cutting anything as its so wet the belt is getting wet.
Does this mean the holes have been stamped incorrectly?
I'm also surprised that the tensioner pulley is angled down. Seems the person putting it together didn't pick up on that?
I think you may have found the problem and that the idler arm is mounted incorrectly. Look at lower right of your image. The pivot point bolt appears to be in the 42" hole and not the 38" hole. This throw the left spindle brake out alignment too.
But since is working moving back to 38" setting may just problems again.