We had two of the three-string (4690) Hesston balers, which are similar to yours.

There's usually one reason to set the clearance tighter (like down to 10 thousandths -- 0.010") and that is to get rid of the "fuzz" on the bottom of the bale that is somewhat common with inlines and then to make the bale flake better.

Fuzz: When you look at a bale from a Freeman or other side-charged baler, you see the result of the knife running down the edge of the bale without interference from the needles -- one smooooooth edge, no "fuzz" from dull knives, no stubble, no nothing.

Flakes: When you have a somewhat "stringy" crop or a little bit too much dew moisture (or even stem moisture) on the hay, and you get a little too much clearance on the knives or the knives lose a little bit of edge, the bale from an inline won't "flake" as nicely as a Freeman or NH side-load baler.

When you set the knives to nice, tight clearances, you get flakes that are much like the Freemans. The Freeman advocates will tell you that you'll never get a bale as nice as a Freeman (and that's their right -- the Freemans make nice bales), but the horse people will generally quit their griping about the "flakes that hang together" from inlines when you get the knife tolerances really tight.

NB: You should make sure that your plunger bearings and rollers are new and in good shape before you go shimming the knives down to 0.010" -- because if there's a bit of slop and that plunger bobbles around a bit in the chamber, you're going to lose a set of knives when the plunger clips the knives together.

BTW -- I used a 4.5" grinder, then I used a orbital sander with 120 grit to finish the sharpening. You can get those knives sharp enough to shave with if you wish. If you keep your hay clean of dirt and gravel, you can go a season without having to re-sharpen them. If you make a habit of baling gopher mounds and squirrel hills, you're going to have to sharpen them every cutting.