To follow up, I checked 3 factory manuals from different years and 5 aftermarket manuals. 6 of the 8 manuals show that when properly adjusted, the mark of the sprocket should be to the right of the oblong groove on the thrust plate. Just like everyone on the forums says it should be. Like this:
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With the milled head and new chain, I ended putting the sprocket on position #2. The only thing to worry about is valve to piston clearance.
I've been messing with these engines for some time and thought I knew what I was doing, but that "How to Rebuild..." book by Monroe really confused me with its incorrect picture. Especially when the caption says "Courtesy of Nissan Motor Co".