Hi Mike
A few pictures may help to solve the problem of clutch adjustment, normally there is a knurled ring that rotates to align various numbered indexing positions depending on tap size, clearly the smaller diameter tap the less torque is applied before the clutch disengages to prevent tap breakage.
With such small threads with through holes in thin plate there will be very little load on the tool, perhaps not sufficient to disengage any clutch on the tool, especially if you keep the rpm low so you can reverse the quill before the tap reaches full flute length. In the tap drill chart I have tapping drill size is 1.25mm for M1.6 x.35
Using the M1,6 with 0.35mm pitch will only provide 4 threads in the plate, so only for light fixing, best to use some kind of thread locking liquid (Loctite or similar) to increase the joint strength.
Emgee