Ah right cheers Jackie, I see where I have gone wrong. It doesn't actually say about the 7-10mm in the instructions, just to use the skeg as a guide for the hole.
Right, looks like I'll have to remove the propshaft. Should be able to do it by taking a hacksaw in between the skeg and the shaft, that should free it off, and re work that bit then!
D'oh!
Cheers,
Steven
EDIT: I tell a lie! just had a look at the boat now, looking at the hole that comes through into the tray. By the looks of it, the glue that was holding the prop up into the correct position has given way somehow, thus letting the prop sit lower. I've just jacked it up by sliding some plasticard inderneath, and it now sits within a couple of mm of the shaft! Think I'll drop a spot of glue on it and try that first!