The shaft seems pretty tight, with no obvious slop.
There is wear showing on the flywheel and on some of the stator heads but nothing really significant.
I gather there is a replacement for this unit from the States via ebay and it's mounted outside the flywheel and comes with a new sensor but at $130 it's not cheap if this is not the problem.
Edit : Just had another look at the shaft play and there is some,
possibly .3mm, enough to feel but not enough really to see.
Does this indicate an engine rebuild is required?
If so I can see this engine going in the bin.