They often do have a bit of looseness, and that's a good thing on the K0-K2 engines in particular. They are mounted on those splines, which are not a perfect fit. The reason: when under power, especially the lower gears, a lot of torque is applied to the final drive bearing and the case around it flexes slightly. This lets it move (forward) a bit. The shaft then is at a slight angle inside the gear, so the gear would become misaligned at the teeth, which are trying to drive it in a parallel-face manner. So, the gear can stay straighter while the shaft angle underneath, and the splines have to take this load. Over time and miles, they get a little bit of arc-wear in them, and in the splines on the gear, so the gear then wiggles when you hand-test it.
Honda never published a spec for this wear limit, unless you infer one from their general spline-lash for the tranny, which is a few thousandths (that value escapes me at the moment, it's in the Tranny section of my book, though). In my experience, though: if you have the single-row final drive bearing on this shaft, a loose final drive gear is a real friction reducer, puts more power to the chain. In the later engines with the dual-row final drive bearing, the splines take a LONG time to show any looseness, and this allows the shaft bind to lose more HP right here, because the 2-row bearing has a wider face into the case, and can't move much.
The original designers of this engine were clever fellows who had designed the 250 and 305 engines, which were very similar in many respects. They used these flexes and wiggles to put more power and less wear to work in the bottom ends. It's fun to discover these things, years later.
