The spring absolutely has nothing to do with pushing the arm back into a "neutral" position.
Throw the spring as hard as you can into the nearest trash can.
The clutch spring inside the engine case is plenty strong enough to move the release arm back.
When you swing the arm inwards, towards the carburetor, and it stops moving, that is the point where it touches the other internal parts to release the clutch.
Ok, after trashing the spring do this:
1. Loosen the lock screw in the brass cable end until the cable can slide through it. Do not remove the brass cable end from the cable.
2. While keeping the brass cable end in the cable hole on the tip of the clutch release arm , grab a hold of the end of the cable with pliers and pull the cable through the brass cable end until the cable is tight.
3. Swing the release arm (with the brass cable end still in the tip of it) inwards towards the carburetor until it stops swinging. Do not forget to keep pulling the cable through the brass cable end as you are doing this.
Tighten the lock screw in the brass end.
The cable strand between the cable housing stop thingie on the top of the engine case and the release arm should almost be in a straight line now.
You should barely be able to wiggle it. It should not be as tight as a piano wire though.