Does this look right?

Yes. That is fine. The starter drive shaft is threaded with very coarse threads so that when the starter is engaged, the gear spins out to engage the flywheel and the speed of the engine plus the spring in the starter drive rotates the gear back in again. If it was lined up with the flywheel all the time, the starter gear would be spinning with the engine all the time. Can you imagine how fast that little gear would be spinning? It would fling apart in no time.