I've noticed the same problem on at least one of my Powermaster starters. I went to the extreme of taking it apart and machining the mounting flange down a little, to get more complete engagement between the ring gear and the starter gear. On a high compression (13:1) large (511") FE, the starter would tend to tear up the front half of the ring gear after a while, kind of rounding off or chipping the teeth. After I machined it I got almost full engagement of the gears, and no more problems. My guess is that the starter as-is would work fine for most FE engines, despite the poor engagement with the flywheel, but if you are running a big engine or a lot of compression, there could be trouble.
I've gone to RobbMc starters now, because they have that shaft support available like a stock starter, and you also get full engagement of the gear.