Yes, space out the driver, but keep an eye on how much that driver pulley stays on the engine's shaft. I had the same issue... lemme go find my thread that had some part numbers.
http://www.diygokarts.com/vb/showthread.php?t=38463
Your problem looks more severe than mine and may require a typical thick washer versus the shims like I used. Maybe both
Pic for reference. Will look like this ...............
Is the belt on wrong direction also ???? I thought you were supposed to be able to read the writing from the outside. Should have a direction marker on it somewhere also.