pat mcgroin

Is there a key that fits between the 2.
It sounds like the key may be misaligned and isnt letting it seat all of the way to the bottom..
Im not certain of that exact engine but there is usually 2 types of key set up.

1. A key may be shaped so that 1 side is wider than the other and fits so that the side of the key is parallel with the shaft.

2.The other one has a key that is more rounded or oval and is a little trickier as is almost rotates into the correct posistion. It may take a time or two to get it right.
When itslips out of posistion it will do what your are experiencing and wont let the flywheel go all of the way down.

Usually when you place the flywheel it should be up to 1/8 inch from the final posistion. Usually less.
Try to pull the flywheel and then set the wheel back on without the key and I think you will see that it goes down farther. Then when replaceing it with the key it will go to the same spot. Then you can tighten it down.