The tucker fingers should not touch the needles. In fact, the tierods on them had worn swivels which I replaced with rod ends from Home Depot. Remove them for inspection and see if the pins they ride on are worn. If they are their swing motion will be erratic and cause a missed tie. If you can weld, fill in the worn metal with some rod and grind it smooth.
I'll get some pic of my own for you to compare. Note that you can swing the tucker fingers yourself just by moving the cam follower. This action should be fairly stiff. If not, replace the springs on it.
I believe the manual states that the needles should lightly touch the knotter frame as they come up. This is probably to prevent them from getting skewed as they rise.
The baler probably did sort of work, just not reliably. That's what doomed it. Mine had a bent tucker finger shaft, worn billhook tooth, a chipped twine knife and a missing spring on the plunger stop. It only tied on one side. The guy had his 10 year old kid hand tie the missing string.
I would also tell you to decide now on plastic or sisal twine. Check the local availability at TSC, Farm & Fleet, local dealer, eBay, Internet supply, etc. Most folks have a strong opinion on either one. I like the colored plastic because its easy to see on the ground. When its wrapped up around your lawn mower plades its easier to remove. I think its stronger, too. But it will burn your fingers when grabbing it and throw the bales during delivery or feedout. The twine tension must be adjusted for either type (plastic is more slippery). You can't intermix the two types without a readjustment.
The knotter is only one subsystem. The plunger gearbox and its slides need inspection as does the feeder knives: stationary and plunger knife. Great if you can get the bolts loose to remove and sharpen. If not climb in there with a 4" grinder and touch them up. Sticks, stones, rake teeth, mower knives, rattle snakes and an occasional woodchuck have gone thru mine.