I have had ring gaps up to about 3 mm on 2 strokes that would run but without much power. Hard to start, too.
I don't see how the tappet clearance could have been so large unless someone had ground down the stems to create that much clearance. If that happened, you'd have to replace the valves - cutting the seats that much deeper to reduce the clearance would have left the seat inserts too weak, and shrouded the valve heads as well.
