Poetman,
There's definitely a problem with the geometry of your muffler! In the first picture, I can clearly see that the tension rod is trying to pull directly in on the brass nut...it will never move like this. The angle of the bar holding the brass nut needs to be elevated, to allow it to move up when turning the muffler knob. This is really simple geometry and you should be able to see what's going on. Hope you figure it out.
However, there's also the chance that the movable arm is binding up against the pivot point, which is merely a rivet. Completely remove the muffler knob and see if you can freely pivot the arm with the muffler pads. Let us know!
-Mark