you can -especially on this setup- have the chain too short
chains like to stick to sprockets at speed, and therefore need a bit of slack to have the 'time' to break free
usually the clearance beteen the two sprocket shouldn't be
much smaller than twice the diameter of the smaller sprocket
and ideally not much bigger than twice the diameter of the larger sprocket
(very general rule of thumb.. with room for exceptions in special cases and slow running chain)
I'd say: it'd be safe to move the engine forward a bit.
say one or two full links added to the chain
keep in mind that you might need to remove the chain someday (say for engine maintenance)..
and it's easier if you can shorten the distance enough to slip it off the engine sprocket without opening it back up
(especially with rivited chain of course)
but if it's all set up already it'll be fine
I personally wouldn't bother to lengthen the chain if it's cut to that length for now,
if everything runs fine I'd leave it as it is for now;
once it's worn out and needs to be replaced I'd get a longer one though.
Only exception: if the chain runs especially noisy having not enough slack or
acts up occasionally (sticking and giving you a jerky ride)
in that case I'd add two more links sooner
'sid