Anywhere from 0.012 t0 0.020 will get you a good runner.----Worked on a 59 model recently and it still showed factory machining marks on the rings.----Some of these fishing motors do not get much use.----What is your ring gap now ?
That would be a different switch !----Not the same as the one I am suggesting for you to check.----So check the shift interrupt switch on the motor linkages.
??---The 2 piece driveshaft leaks.----But the crank holds it in position and then it does not leak.-----And 25 year old motors with some hrs on them will show wear on the seals and it is best to install a kit.
Well it should fire with fuel in the bore.----Crank seals are not involved in 2 stroke compression.----I say you have weak spark.----Does spark jump a gap of 1/4" ( 6 mm ) or more ?
Stop guessing.-----Load test your battery---FREE service in most places.------Take starter apart for inspection and ohm test on armature.-----I say motor is not turning fast enough for magneto to be happy !!!
A good unit will shift to neutral after one turn of the flywheel.----But it may still turn when on a trailer with no load on the prop.---Just the nature of the gears and bearings in oil.