Well, you'll never prick your finger on any of those sprocket teeth. They're not folded over, but they sure do look worn down. Now's the time to upgrade to a larger or smaller sprocket if desired, can't go wrong with a sharp new sprocket.
All you need is good tension on the chain to keep it from skipping. Slide that wheel back until you know there's not enough slack left in the chain for it to jump teeth under load even if you tried to do it (bottom of chain goes slack and sags under load.)
How's the teeth on the clutch? Just as worn?