If you put a clutch in it will slip and the engine still won't start. You might check the actual cranking timing. It sounds as if the ignition may be firing early even tough it should retard to just before TDC. I think some or all of the DLE 20 have a strange timing curve? The rigidity of the starter is important as well. Are the long standoffs rigid enough to prevent them from twisting?
What are you doing with this generator setup? You can buy a 500W generator
with a four stroke engine for under 350USD delivered. I love tinkering, but unless the purchased product didn't fit my application I would just buy it.