Mine fits in the other side of the bike that because is 2011 i note that older ktm 65 have the expansion the same side as your bike
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I'd shim it to about .10thousandths side play centered.I've been told to leave a reasonable amount of side play in the crank, though 1/8" sounds a lot. Also if your crank slides easily, is good, as the two flywheels must be reasonably true.
I actually bought two pipes of Ebay, the one I have received is a new cheap pipe, the other which should be here in a day or so is a 2nd hand pro pipe.
I bought the cheap pipe as I figured it would be heavier gauge and easier to weld/modify and was not plated and so would paint up better once I was done with it, it also came with a reasonable straight through silencer, and a heat shield for my knee.
I found that the original mounting flange had an awful step in the pipe where it met the hydro formed section, and I'm not sure that I wish to reuse it. The pro pipe maybe better, and appears not to have the 's bend' in the header section, so may fit with less mods, but unlikely as neat a fit as the one I've cut up. I'm likely to make a flange possibly with its own slip joint, as I already have some pieces here that will likely be usable, and I want to get the header to flow as smooth as possible.