You could certainly use 10/32 bolts as they are plenty strong. Remember these bolts are in tension you could not pull them apart if you wanted too... A simple bushing would suffice of wood or plastic.

That said I have several 3W100 engine new and old versions. I have always used 1/4"-20 allen/cap screws or bolts. I don't understand why your having a problem. Are you using hex head bolts? You mentioned socket bolts?

The throttle lever has to be extended or replaced. I generally replace the stock setup with a nylon arm, such as those used on tri-cycle nose-gear units. DA has installed the arm for you.