There are no hidden tricks to the Suntour Cyclone f/derailleur. They are simple, solid, and work great, at least in my experience. I have one on my touring rig and it handles the half-step plus ridiculously small granny gear quite well.
Backing the screw right out, but the pivot not hitting it doesn't suggest anything other than the screw being too far out. After all, the derailleur has a certain amount of maximum travel - all the screw does is limit that travel.
The trouble shifting down to the smallest ring could be due to a number of other things - too much tension on the cable, incorrect position of derailleur laterally and/or vertically, incorrect position of chainrings relative to the derailleur, or even a worn return spring. Firstly, I would make sure you have the bottom bracket spindle in the right way (like you said you checked), as if the spindle is drastically non-symmetrical and you installed it backwards, it could make the chainrings sit too far in in relation to the derailleur cage. Check the angle of the cage - it should be fairly parallel with regard to the chainrings. The height looks okay by your photo, so the last thing to check is the tension on the cable. Push the shifter all the way forward while in the smallest ring and then take the slack out of the cable - don't absolutely yank on it, just pull it taut and tighten the bolt. If still no go, then perhaps it is a case of a worn-out spring, though I rarely ever see front derailleurs with springs so worn that downshifting is troublesome - this tends to be more a symptom of rear derailleurs.
If you still are having troubles, then I can offer you no more. Maybe someone else will pick up on something I've neglected to mention.

-Leigh