you adjust it at the throttle for the slack. you dont want the contacts to touch or it will ground it out. but the etc is more designed to interup the spark and not really stop it but it's worth a try to make sure it's set correct. imo

 

i adjusted it to 1/8 slack and the contacts are not touching.i pulled the plug and only have spark at low rpm,if i push the thumb throttle in just a little until the contacts touchi have spark at all rpm.When the contacts are not touching my reverse light stays on dim and when they touch it goes off.I also pulled the white wire that comes from the etc and with the contacts open i have voltage to it,once they close no voltage,but even if i hold the throttle in i cant get it to start for some reason

 

I have a 96 scrambler 400 and I had the exact same symptoms from your first post (dim yellow reverse light and limiting in forward). Drove me crazy for a while. It turned out to be the switch inside the throttle box. Not a real robust switch. It is made so that if your throttle cable sticks, your rev limiter will engage and slow the ATV down since the switch is no longer made. My thumb throttle was really loose anyway and the switch was messed up. I tried to rig it, but I ended up getting a used throttle assembly on ebay for $40. I'm definitely not an expert, but this was just my experience.