You seem to have posted the wrong model number, or sears is giving use the wrong one for that number because it doesn't match the pic at all.
There is no adjustment for the clutch on those. If it is still running the trans with the clutch pushed the only thing I can think would be a belt that is to short or improperly routed.
If you need to adjust the neutral position on the lever it can be done where the linkage meets the trans on the top.