Re: Keeping chain out of spokes???
Although I like to see a sprocket with absolutely no runout, 1/16 to 1/32" isn't really that much. In fact it's probably better than most. That's for lateral runout. As for concentricity to the hub there should be no reason why you can't get that down to zero. It takes some work and patients but centering the sprocket on the hub is essential.
Maybe the sprocket is bent. This is not uncommon. Lay it on a known flat surface, a sheet of glass is the best, and check that the sprocket itself isn't warped/bent. If you find that it is you can work it flat by using several means such as a hammer, a large Cresent wrench or whatever tool you can find to get the warp out of the sprocket. If you don't feel comfortable doing that, replace the sprocket with one that is flat.
I've had several kit sprockets that had a warp and was able to straighten them with a little work.
While you have the sprocket off check the rubber donuts to make sure they are of consistant thickness. I've encountered them that were noticably of different thicknesses across their face. If that's the case a side grinder, or a drill motor with a course sanding disc can be used to work the rubber into the proper thickness. (sand off the high spots)
Good luck, keep us informed.
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