The set screw needs to come out. Sounds like it's stripped. I would be inclined to drill it out. You'll probably need to re-drill and tap the screw hole to fit the next larger size screw or replace the clutch knob when you're done, whichever is easier for you. There's nothing rare about those parts so replacement might make the most sense.
You might already know this. ThayerRags here sells parts on his website. He will most likely have what you need.
I hope this helps,
Rodney
EDIT: 10X replied while I was typing. His idea makes a lot of sense. I'd try it first.