Mikado has changed over time how they best think the washers should go. The washers just fix the vertical locations of the belt drive and the main gear on the shaft, so the belt rides as close as possible on the center of the pulley, and the main gear doesn't touch the frames where it rides very close to the frames on the top rear of the gear.
The current wisdom (and as it is noted on their downloads on the Mikado site), is to use a thin washer between the main shaft bearing and the belt pulley, and a thick washer between the pulley and the main gear.
Also, a little vertical play of the main gear is fine. Add a thin or thick washer between the c-clip and the gear, to remove as much of it as you can, but in any case, the main gear should be able to run free, and not have drag on it from no spacing.