That's as far as it's going to go even without the peg, anyway, the peg is there so the ratchet does not get damaged inside the kickstart assembly (you would need to look at one closely to understand. The kickstart engages from 2 o'clock to sligthly past 6 o'clock (I'd say 6:10).
Thank you Le frog, I can see that, but I have a new kick start lever and it doesn't make since that it gets gouged after bottoming out on the footpeg, then again it seems a lot of things don't always make since on these bikes. :?
There should be a little piece of Delrin on the clutch cover which should actually help prevent most of that. I replaced mine since it was gone with a new piece of Delrin Berger gave me (I still had to Dremel it to dimension) and it did the job.