Just checked on mine and I have 2/64-3/64 movement at end of button on clutch from disengaged to engaged so I am even more convinced you need to back the nuts off a round or two. Hope this helps. Have a good day.

I actually just got around to rebuilding the PTO clutch on my 70 with a kit I bought from an ebay seller. (Doing a bunch of preventative maintenance, next is cleaning out the starter and making sure the brushes are good and replacing the bearings and electrical posts)
Oh boy that bearing was nice and noisy, thrown into the scrap bin with all the bad tiller bearings and worn bolts
someone had rebuilt it with 2 clutch discs, this is a 7hp not a 14Hp so that seems like overkill (saved those discs as emergency spare parts)
One of the set screw holes had been drilled out and had no threads, so I foolishly think, oh i can tap that and put the next larger size set screw in. Well long story short I snapped a tap and couldn't get it out so now the pto pulley has a piece of tap plugging the hole and lives there now.
PTO works smoothly though now and is adjusted properly

So I took the pto back off, for what has to be the 50th time, and did some more readjusting.

Some starting measurements: the level travel measured at 0.2445" and my plate-to-snap-ring was 1.2680" - if I'm following Grandpa53's line of thought, that means I need to have a plate-to-spring-bottom of 1.524" (if I'm at a 0.030 button gap)

I ended up around 1.6" and there was a tremendous improvement. Still doesn't sound super great, but I am now working with two buttons that have a bunch of wear on them.

I was able to mow and till a very large garden for a friend, and the pto was responsive.

It could use more fine tuning, but I may just roll with it for the time being since the mowing season is underway.

Thanks for the input everyone.