Front hub width and bearing adjustment

I have a 1986 Panasonic DX-2000. I am building it to sell to a friend and I have run into a potential problem. The person I purchased it from had converted to 700c. I am switching it back to 27". I am going to assume the width of the modern front hub increasd the width at the drop outs, so when I put the current hub in there is a gap.

When I tighten down the quick release it pushes things together as normal and it all seems snug. However, i noticed the axle only extends halfway into the dropouts on both sides. So my question with regards to this is: is this safe? I apologize if this is a silly question but i dont want to kill anyone.

And then I have one other thing. I have noticed something while adjusting cup and cone hubs. I make my adjustments and go to tighten the locknut. I give them a good snug and then test it. Obviously my first attempt isnt always right; in regards to this question lets say there is too much play. So I undo the locknut and find that the axle is extremely tight. But it was never that tight to begin with. I have tightened the side i am not adjusting, first, and i am holding the cone while I tighten the locknut. I am assuming there is a risk of damaging the hub during this and i would really rather not. So I am not sure if this is normal or i am doing something wrong, but in the case of the latter i definitely want to get it right.

Anyway, i apologize for the long post. Any responses are appreciated. Thank you.