Thanks for the suggestions however I have checked all the pushrods and all fine no chips on end caps.
I have located some steel grub screws with Dog Point End on ebay so hopefully will arrive soon so I can replace all the set screws and re-adjust the valve clearances.
I will let you know I go.
I am also considering converting the 7-35 to gas but will see how the motor runs once the above has been done.
So far I was unhappy with the power the motor was putting out (17x10 beila prop). Hopefully this can improve with proper valve adjustment.