near as i can tell that is normal, as its just traveling back and forth on the pulley drive pinion that it is mated with.the oiler gear is about 3/4" wide and pinion drive 1.1" thats around 1/4" that it is sliding around.i think you have come to the right conclusion as with this old stuff , few have experience working on it so a person just needs to stop an study and come up with answers that makes sense as to why ihc did that. your gonna have a nice unit when finished.
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