I think you've just got the clutch in the disengaged position. In this position the belts do go very slack. Below are photos of the clutch in both the engaged and disengaged positions. Note there is a lot of travel.
We haven't discussed connecting the clutch lever mechanism. It's just an over-centre arreangement with a spring to apply pressure. I'm not sure if I saw the spring in your collection- I don't think so. Any firm spring of the right dimensions. Bunnings has a good range. Note my v bodgy 'spacers' behind my spring. I think I put them there as a teenager when I was struggling with belt slippage. There are twohole positions for the eyebolt on your machine and three on mine. I've never seen any use for the other holes on mine. Yours is on the bottom one too. The bottom one gives maximum travel. Conversely the top one will give least travel but best mechanical advantage. It also allows the arm to overcentre more but excess over centreing just reduces belt tension. Leave it in the bottom hole and see how you go.
You need to hook up the cutter brake wire at this point . The wire is still on your cutter clutch assembly. There should be a bolt with couple of links of chain (same as the height adjust) on the brake arm on the deck. Connect this to the wire. Probably best to get another piece of wire. It's just wire . I'll take a photo tonight. Also, did you end up putting the bushes in the cutter clutch pivot points that we were talking about?
. I'll take a photo tonight.
