Noahscape, i'm glad to hear you got a similar setup to work, at least I know it is something i'm doing and not a limitation of the mech. I did not re-dish the wheel, it is a new wheel, purchased last summer and it doesn't look out of center with the 7 speed cluster so I don't think it was needed.
Neal, I couldn't push it further manually, it's about 1/2 way between the two large cogs. The derailer was maxed out, the one thingy was hitting the other cable bolt ******, wouldn't go no further.
I first tried with no spacers and the small cog rubbed on the dropout. Then I put a couple of spacers/washers in and bingo, spun like a champ. I'm guessing the spacers were about 4 mm. I'm suspecting I overdid it, I think I will try to fine tune the spacing to get it to where the small cog is just a gnat's ass off the DO.