That’s correct. Just enough clearance to allow the spindle to turn freely.

Lorena, Texas (South of Waco)

So the all-thread and two lock nuts spin against the two flat washers with just a little clearance?

For those of you who emailed me about the cam bore grooving tool I am using, here are some pictures.
 

 

 

 

Lorena, Texas (South of Waco)

Hello   the groove extends a little past the oil gallery holes that  move oil to head. I put upward pressure  ( toward  crank shaft saddle ) on all tread  to make groove. I might be a little deeper than .020/.030, as I had no way to measure it. Thanks Ted for putting up pics.  Bill Oregon

Those pics are Bill’s.  But to answer your question, it’s not a 360°groove unless the cutting tool is worked around the bore in a circular motion.  As long as pressure on the tool is only applied to the crankshaft side of the cam bore, only the three holes will be interconnected, and no groove will be present on the valley side of the cam bore.

Lorena, Texas (South of Waco)

Ted, from looking at the diameter of the cutoff wheel in your photos, it looks like your cut is 360 degrees, no? 

Here are some pictures of the cam bore groove operation that Bill asked me to add.
 

  

  

Lorena, Texas (South of Waco)

Assuming the cam bore hole is the correct size, then the answer is No.  Adding a groove to the center cam bore hole does not require any additional modifications to the bearing itself.  If the cam bore or cam bores are undersized, then putting the cam bearing on a mandrel and grinding the O.D. of the bearing in a crankshaft grinder helps to restore the proper crush on the bearing when installing it in an undersized hole.  That’s not just a Y issue but one that covers most engines in general.

Lorena, Texas (South of Waco)

Are any modifications required/recommended for the cam bearing?

A picture and a scale drawing with dimensions would be nice to see.