I have a 21" on it and it was OK, though I did have to persuade it a bit. I also had a new undrilled fender so I could play with positioning. A 20 or 19 tire should be fine. Another option for the stay is to space out the fixings with a spacer at the fork, but I did not like the way it fit.
Would increasing the length of the flattened portion to clear the head of the nut have worked ?