Here are some ways to get more low end power:
1. Increase the size of your big sprocket. Unfortunately, the one you have is quite large already and anything bigger could drag the ground.
2. Reduce the tire size. Doing that could make your current sprocket drag the ground.
3. Get new clutch with smaller tooth count. Your clutch is already small at 10 teeth. Not sure if they make one with less.
4. Get bigger engine with same size output shaft to fit existing clutch. Cost could be a factor.
5. Convert drive system to Torque Converter. Cost could be a factor.
The clutch should have some play but not too much. The area that engages the centrifugal shoes is probably fine, but the brass sleeve that the clutch housing/sprocket spins on is probably worn. That is what causes the wobble. Since you are just trying to get it going for you niece, I would suggest buying a new heavy duty clutch with no more than 10 teeth (less if possible). Also check the sprocket alignment. It looks like the chain is rubbing on the clutch housing based on the swirl pattern.
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