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It can sometimes slide "into" the engine when you're slipping the flywheel / rear counterweight onto it, but it's obvious when you look at it.
Having it a little loose is not going to really affect it too much.
Having to shear that much cross section of the key would most likely throw the rotor through the rotor housing first before the key shears in half.
If you're paranoid about the key falling out, hit it with some Loctite green (after assembly).
That should keep it in place.
-Ted
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