You could be on to something here, another noob question but what should the space be between the inner chain ring and the chain stay? Mine is currently about 2-3mm.
This is where you get into the idea of chain line, which is an 'ideal' position for the chain when on chainring and sprockets. On a single speed, relatively easy: the chainring and the sprocket should be directly in line fore and aft, with the chain running between. Once you start using multiple cogs and chainwheels life gets more complicated because the chain runs slightly side to side as well as fore and aft when the largest and smallest cogs are selected. Sheldon Brown explains it better: http://sheldonbrown.com/chainline.html
There are other issues to consider, such as the taper of the BB axle (Italian and Japanese designs differ even with the same length of axle so take care to match your BB with your chainset). It all sounds complex perhaps at first, but by understanding what you are doing when you make changes you are much more likely to make effective changes. It's a worthwhile challenge to master the background info.
Great help cheers, had a read through the sheldon brown article and inner chain ring seems to be in right place (41mm +/- 1mm). Think it much just be the oversized frame that make the inner chain ring appear so close to the frame.