The prop needs to be all the way on. The back of the propeller 'grips' to the metal washer that goes behind it. This is sometimes called a 'prop driver' cos thats what it does. It is mainly this bit that spins the prop. The noise your hear may be a little imbalance, but it may be that the engine in turning faster than the prop.

A good investment is a prop reamer. It is a little tool that is designed to open out the hole in the middle of the prop. I think Great Planes makes a stepped one, which will be handy in the future for when you have larger engines.

You could just drill out the hole. Make sure it is no larger than the crankshaft, and as you have already noted, make sure that it is central.