Hey Lee,
Yes free play is about 16th, the adjustment @ the pulley is in till feel slight resistance. And back a quarter turn. You can have more than 16th but not less.
Look @ the shifter arm on the left side of the tranny. Right behind it on the tranny case there is a set screw and lock nut. Is the set screw flush with the lock nut?
If it is, if you turn the set screw out 360 degrees it seems to shift smoother.
Bike must be in 3rd gear when adjusting @ the tranny. As you turn the detent you want the same amount of movement back and forth before it actually shifts.