The missing handle would go to the left of the gear shift. From what I have gathered you are supposed to be able to pull that to disengage the clutch, then engage the lever under the seat to engage the PTO (the one under the seat has 3 positions, main clutch power, neutral, or engine powered). The lever under the seat seems to work fine and will engage if I idle down, but the PTO clutch seems to have no effect on anything besides making rhe grinding noise I described. I am almost wondering if the balls in the throw out bearing have left the chat and I am just trying to use the collapsed races to throw out the clutch. For reference if the implement is engaged and running actuating the clutch does not slow or stop it.
As per
@Tx Jim, is the PTO clutch lever adjusted according to WSM.
As an experiment, have you tried starting the engine with the PTO clutch disengaged, PTO gear engaged, and with a PTO-driven attachment connected? I had a similar issue to yours, so I tried that experiment on mine: the starter motor turned the engine effortlessly (i.e. no noticeable additional load on the starter) and started the engine, and the PTO driven item (a hay mower) remained stationary. So the PTO clutch was disengaged and doing its job. I engaged the clutch lever and the mower smoothly took up the PTO power. So the clutch was fine, it was was dragging just enough to keep the PTO gears turning when there was no attachment. So if correct adjustment doesn't fix the grinding, like
@dvcochran says, you might have to take your time to idle down before engaging.
Not sure if you are aware of it, but "Main clutch power" you refer to is the ground speed PTO.