I presume that you are talking about the clearance to the bed knife?
Too much clearance is safer than not enough. If your drum bearings have generated some extra play, then close tolerances will make it crash. The clearance to the bed knife only determines the quality of the chips. Too much clearance, and you will get lots of "stringers". especially on thin green branches.
There are several more things you need to pay attention to:
1. How far the knives are sticking out from the drum determines the size of the "bite" on the wood. Smaller protrusion away from the drum diameter is slower, smoother, and less likely to wear out your engine and drive line. It will produce finer chips, too. It is also less likely to feed easily when you toss in a branch.
2. All knives MUST be set to exactly the same amount of distance from the drum, and it is important that they be parallel to the drum.
3. After all the knives are "set" and measured, THEN you adjust the bed knife to match the cutters on the drum. Doing it in the wrong order only guarantees that you will repeat the mistakes of the guy who did it before you. Once you have set the bed knive AFTER setting the exposed knife length, then check each knife against the bed knife to make sure that they all match.
It is IMPERATIVE to scrape clean all the grooves, knives, and wedges of any material that would cause a less than perfect fit. When you clamp the wedges down on wood chips or other material, even burrs in the metal, you are putting tons of pressure on one small point on the blade. Cracks will form, and the whole thing can fly apart. Or maybe just not hold, with the same result.
It is equally important to use new bolts if you don't know the age of the old ones. I don't know how many times the bolts should be re-used, but if they are old and rusty with rounded heads: replace. Torquing them time after time will make them break. Metal starts flying...
I had an old Olathe chipper that had flimsy 3/8ths thick knives that kept breaking. I finally discovered that there were TWO important things to set that were not on the wheel. In addition to the non-moving bed knife, the feed control plate that dropped down to stop the feed had an upper limit stop that was critically important. If not set properly, it could bounce up to hit the knives, a thin blade would shatter, and 1 second later every knife had turned to shrapnel.
If the bolt holes are worn out or stripped, then the bolts won't hold as well as they should. Many drums are drilled deeper than they are threaded, to allow for some damage correction. A good sign that your bolt holes have been damaged is if they don't all take the same length bolt. Use a caliper depth gauge to make sure they are all correct, and match the length of the bolt. I would guess that you need at least 1" of threads in every hole.
You need to know and understand every single aspect of the chipper mechanism. Otherwise, you will miss something important.