This is for you Harry...
I've simplified the drawing to try to make it a little easier to understand.
Power from the engine is transferred to the large red sprocket via the engine clutch, then directly from the small red sprocket to the rear wheel. The quill shaft is supported by the large bearings in the bicycle frame and is not connected to the pedal shaft, it serves to support the primary reduction sprockets and the pedal shaft bushings only. The pedal shaft rides in the oilite bushings and serves to operate the pedal driven sprocket on the rear wheel and can be used to apply the coaster brake or pedal the bike (or hopefully start the engine, if I can sort that out too). I hope this helps you square this away in your noggin