BSA use cork because it is relatively easy to compress. The cork washer goes under the big dynamo drive sprocket, sandwiched between the raised boss on the inner cover and the underside of the sprocket. It is not really an oil seal, it's more of a thrust washer, and when assembled will remove any end float on the idler pinion shaft. Treat it to a smear of grease before assembly, to prevent friction burning on first start up before the grease in the dynamo cavity works its way down.
There are various thicknesses of cork washer available to go between the camshaft drive gear and the breather sleeve, the drive peg should be well located into the breather sleeve. Choose a thickness which ensures a reasonable seal without any camshaft end float, but not too thick to load the sleeve against the inner cover and put strain (and friction) on the inner cover as it is tightened down. You can rub a thick washer down on a sheet of abrasive paper to get a nice comfortable fit. This washer pushes the back of the cam gear against the cam bush, and controls the cam end float, which should be zilch.
If the cover has been worn, likewise the breather sleeve, this could be the reason for the poor engagement. Have a look for evidence of a wear ring on the face of the sleeve, caused by too much load in a previous life. Quick fix is new parts or just a new longer drive peg....messing with the outer cam bush alters the lateral position of the cam, so is a no-no.
Swarfy.
