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Got tired of the leak at my plug so I bought a new outer primary off ebay for $125 and installed. Previous owner had tightened the plug until you could keep turning it and it would go straight thru. The new primary plug gets tight now but about 1/4 inch is sticking out the bottom. I guess I'm use to the plug going in flush . How far does the plug need to go in? No leaks so I figure its in far enough.
No leaks, you are are fine, mine hangs out a little. If you run it in too far there is a chance you can crack the cover at the thin spot. I put a little RTV on the plug before I install it.
The primary blug is a tapered pipe thread, which means it tightens up as it goes in. Tighten it until it's snug. Mine sticks out a bit, and how much can vary from bike to bike, depending on how deep the tap was run into the cover.
If you're worried about leaks, use a bit of Loctite pipe sealer on the threads. Then there will be no need to overtighten the plug.
On my bike, if I had 1/8" of the plug protruding, it would fall out on the ground, so it apparently does vary somewhat. Both my tranny and primary plug are just above flush when snug.