You'll need to
carefully tap that bushing into the drum until its level with the outer part of the gear. Use a piece of wood between the bushing and your hammer, and make sure the bushing is going in straight.
Then instal the key, and slide clutch hub assembly on, (it can go either way)
then the fiber washer goes on first, metal washer second.
Then use your finger to work 2 drops of motor oil into the bushing, and slide the drum on.
Then you'll need to buy a Grade-8, 5/16"-24 x 1" long bolt, plus a 5/16" lock washer and fender washer to hold the clutch on. It'll screw into a threaded hole you'll find at the very end of your crankshaft.
When you try to tighten this bolt, the engine will just start spinning. To stop the engine from spinning, you'll need to simply remove the spark plug and feed a few inches of clean rope down inside. This will stop the piston from going up so you can tighten the clutch bolt.
I just noticed your clutch didnt come with a key, you could order one online or most hardware stores stock the 3/16" keys that you'll need.
But before you instal the clutch, we need to figure if we want its drive gear facing the engine, or away. (that's called mounting your clutch inboard or outboard) I prefer inboard facing the engine when I have a choice, but depending on how everything fits on your kart you may have only 1 possibility so the chain will line up.
So I'd suggest you instal the axle with the sprocket first, then bolt the motor mount and engine on, and see how the chain lines up. This is the only way you can tell for sure in you need to mount the clutch inboard or outboard.
If you dont have a #35 chain yet, I recommend the 106 link, RLV gold on gold here:
http://www.out2win.com/catalog/chain_35.html
You should order a #35 chain breaker tool:
http://www.out2win.com/catalog/toolcb.html
And you should get a chain guard for safety:
http://www.out2win.com/catalog/chain_guards.html
Any of those Briggs Guards will bolt on your clone engine.
Plus you could just order a key for your clutch here too:
http://www.out2win.com/catalog/noram_ge.html