D'oh! Just destroyed my Crystalyte motor... and my bike
Your picture with the red and blue arrows was worth a thousand words.
But isn't the obvious solution like this:
1) first remove the clamps at the end of the torque arm, so the axle can be easily inserted into the dropouts with a freely moving torque arm that is not attached to the fork.
2) Once axle is tightened, position the clamp and torque arm together in their final locations.
3) Finally attach the torque arm to the clamp.