Hi Bob,
Your diagnosis is sort of correct, it will be the end of the transfer shaft having excessive wear on it where it slips inside the thrust bearing to keep straight line integrity of the powertrain and stop it oscillating. Moving the clutch body further outwards from the engine will not solve this issue and looking at your photos you have about a 3 mm clearance between the engine and the clutch body which is pretty much correct. Any more and it creates it's own new set of problems with the clutch fork adjustment.
The only way to rectify this issue is to replace the transfer shaft. This is why they have now become available as a replacement part as many have this wear factor and also sideways wobble of the Woodruff key inside the clutch cone.
You'll never get it to run true without the end shaft dimension being what it originally is meant to be.
Cheers,
BB.
