When the motor is off, the power valve activation shaft in the base of the cylinder should be all the way pushed in. As the motor revs and RPM increases, the arm pulls the shaft outward and opens the power valves. While I have never removed the arm from the clutch side cover, logic says you need to set the arm so the nipple slides into the activation shaft washer (for lack of a better term) without pulling the shaft outward at all. This will ensure that at idle, you have proper seating of the power valve.
In reading your original post, I think you have the right idea.
Let us know how she runs.
Rick