Over the years I did a lot of work investigating squish on a bunch of 2&4 strokes from over 4" bore to under 1". What I found is there is typically a sweet spot where the most power is made. I also found on all engines that 0.010" on either side of that ideal dimension has very little effect on power.
If you do not modify (increase) the squish area and shape of the stock chamber, all you need to worry about is mechanical clearance. 0.020" or more will keep you safe. If it is performance you are after, you need to increase the squish AREA out to the edge of the gasket at least.
The book
"Design and Simulation of Two-Stroke Engines. Gordon P. Blair" explains and quantifies the effect in chapter 4.5.1 page 325: "A simple theoretical analysis of squish velocity". It isn't that simple, but the gist of it is THE SMALLER THE SQUISH GAP AND THE MORE AREA INVOLVED, HIGHER MIXTURE VELOCITY AND MORE ENERGY WILL BE TAKEN FROM THE CRANK. The last 2 paragraphs of page 333 are the most important, pointing out that inducing mixture velocities greater than 20m/s could actually cause detonation.
As I decreased the squish to under 0.010" in a 50% area Yamaha Blaster head, I heard a distinct knocking sound and power was noticeably reduced. Disassembly indicated no contact. Detectable power reduction occurred at under 0.020" and over 0.040" on the Yamaha Blaster so the natural conclusion is that 0.030" was the idea gap on that motor.
Ideally I would have reduced the squish on my China Girl engine until I felt a loss of power (my "dyno" is a hill and a GPS speedo) and then I would have bracketed the sweet spot for this engine. For the area of squish that I have, there is no perceptible difference in power between 0.030" and 0.038". If you have larger squish area, you will need more gap, if you have less squish area you can run a tighter squish gap.
Here is a stock combustion chamber on the left, modified on right:
So, I would guess (from past experience) that this engine could run as little as 0.010" gap with no detonation. Why not? As you tighten the squish gap you are increasing the reversing loads on the wrist pin and rod bearing. Up to a certain point less gap acts as a cushion, but tiny amounts of gap put huge load on the wrist bearing. This is a weak point on these engines, so when I determined I was no longer gaining power, I did not go smaller.
This is an easy thing to experiment with. I stayed on the very conservative side with 0.038". I fear (from experience) suggesting anything less than 0.020" could be damaging over time with the weak wrist pin bearings.
Steve