Charles,
At the risk of teaching my grandmother about eggs, etc……………….And as you are supposedly a beginner at this hobby……………….
You need to have made your new Control Screw (its proper Myford name) in the lathe all in one go so that it is absolutely concentric. Taper, rod, thread and then knob/knurl without taking the raw material out of the chuck. If you cannot machine screwcut the thread with what you have, then you must at least use a die holder, probably with assistance from the tailstock to hold it true to the work. Otherwise your taper will never be true to the brass insert, no matter how much you polish or fiddle with it.
I am confused with your comment about the amount of screw you can see (1-2 turns above the brass part). With the top dust cover in place on my machine I have ~3.4mm between the top of the dust cover front (its a casting so is variable) and the underside of the knob on the screw. You shouldn't be able to see the brass part as the top cover hides it, even if you have not got the spring. The spring itself fits loosly inside the top cover, bearing between the top of the brass insert and the underside of the knob. It is quite a weak spring, just acting as anti vibration. If you do as I do, just letting a few drops in now and then, when I use the machine, then the tap stays shut, so you don't really need the spring anyway.
How have you turned the new part if "the clutch does not engage". It was quite normal on this clutch to lock the clutch engaged, as some found it difficult to set up and keep set up (I never had troubles there), and wound the adjusting screw in to lock it "engaged". I would have thought you had parts missing (like the screw) if you could not engage, so your machine is permanently without drive. Search this site for the early clutch problems. Note that if you take the clutch apart, the shaft must be removed towards the tailstock as pre the instructions that you say you have.
Anyway you have one of the first 9500 or so S7's there, and the drip feed oiler mandrel principle was far superior to the later ones, provided no muck got past that Control Screw!
I have sent you a PM.
Dennis.