Not in far enough means it doesn't fully disengage.... clutch drag... means it's hard to find neutral.
Adjusted "too" far in means the clutch never fully engages. That causes clutch slip under load.... like you're experiencing.
It's a balancing act. Not too much lever... not too little... just right.
As far as clutches go, the XS has very little extra travel to play with.
The clutch slippage was diminished with stiffer springs. Going to AK it would let go at 5800 RPM. Last day of riding it was slipping above 4500 rpm. Since then I installed a @gggGary 8 plate clutch and it holds beyond 6000 rpm. That hit at 4500 to 5500 rpm is pretty entertaining.I know guys do it but I don't understand how they make that worm adjustment too tight. Once the freeplay is eliminated, the screw hits a hard stop. Turning it further will start to disengage the clutch, and you just can't do it with that little screw and a screwdriver. The only way I can figure it happening is if they set the adjustment tight when the motor is hot. Then when things cool down and the parts contract, your setting could end up being too tight.