When "setting the valves", you are setting the valve lash. I always run .002" because .003 always ticks and it sounds like you have engine problems. I am not sure why the cam manufacturer suggests .004, if they have an 800 number you might want to call them to find out if they used and exotic alloy in the cam or something, if not you should be safe running .002". As for the fuel metering question you had, the clip and air screw meter the amount of air going into the engine at idle, the small jet with the flat head screw slot is the idle jet and meters the fuel going into the engine at idle. Have you changed out the carb on t his machine? If not you shouldn't need to change the idle jet, if so I would try putting the idle jet from your old carb in and see how that works. Also try raising the needle another slot or two to let more air in to dilute the excess fuel and adjust idle as necessary.
If I can't fix it, it ain't broke!!