Yes you need to lock the shaft at both ends to prevent the whole thing locking up solid. Also you could lose your prop if it is not locked with a nut. I usually lock my prop first and adjust at the motor end. 😀

yep thanks thought as much,ill shim out with more,brass washers,would you put another nut against prop to lock prop to shaft?

You should be able to tighten the nuts / washers so that the shaft is a nice sliding fit on the bearings in the prop shaft. 3mm is too much. I would check that there is indeed a bearing at each end of the shaft as they can sometimes push out and 3 to 4mm is about the thickness of a bearing outside the shaft.
If you do not have the correct clearance water will run up the shaft, but worse the shaft will not have the benefit of a thrust bearing at each end allowing it to move away from the motor / coupling. Won't do either any good.
If this is a commercial item I would speak with the vendor and ask for their help. Could be that the washers supplied are too thin.
Good luck 😀