My experience with this problem has been limited to large rifle primers, which are a little higher than large pistol primers. When properly adjusted, the shellplate did clear the primer seating cup, but it caught the edge of a large rifle primer. I believe the large rifle primer is slightly higher than the cup.
The primer seating punch has a groove in it for the setscrew, and there doesn't appear to be any way to adjust this, or the primer seating cup lower.
My suggestions:
1. You do not want to loosen the center bolt for the shellplate, in an attempt to "raise" the shellplate. This will cause the shellplate to tip during primer insertion, causing crooked primers. Keep the shellplate as tight as possible while still allowing indexing the sprocket.
2. You can tighten up the stripper wingnut on the failsafe rod, to a position where the shellplate platform is supported by it
slightly. This will not interfere with primer seating, but will hold the shellplate slightly higher than the primer seating cup without having to pull on the operating handle.
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I don't believe it's designed to advance with a primer in the cup.
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I don't believe this is correct. During normal operations, the primer does get seated in the case, so it is missing at the time of indexing. However, at the end of a "run", you have a few cases to run through the other stations, and Station 1 is empty. So there is a primer in the cup, cycling back and forth and going nowhere. (Unless you always use 100 primers every run, without stopping.)
As long as the primer is completely contained by the cup, it shouldn't matter whether there is a primer in the cup or not. However, if it "sticks up", it can catch on the shellplate.