Powermatic Mortiser, model 701, max chisel size

I purchased this tool last week to help me with a workbench I'm building. It is my first hollow chisel mortiser. The place I brought it also sold me the Jet mortising bit and chisel set to go with it as it doesn't come with any chisels. I purchased the Jet bit and chisel set mbc-5, stock no: 708585. It includes 5 different chisel sizes, smallest 1/4" to the largest of 3/4".
When I tried to use the 3/4" chisel, I couldn't get the reveal to work out right. The auger bit was sticking out 1/2" past points of the chisel. I worked and worked with it.
Because I had never used one before, I kept thinking I was doing something wrong.
Well, this am I called Powermatic and talked with them. They told me:
1. I had purchased long shank chisels and didn't need to install the chuck extender. (Although the user manual has a picture of the long vs short shanked model and it certainly looked like I had the short shanked model.) The auger measures 8 1/4" long from tip of the point to the base of the chisel. It's not really a big deal, I'll just take the chuck extender off.
2. The max chisel size that can be used with the Model 701 is a 1/2" chisel. When I pointed out on page 10 of the user manual it says, for chisels 1/2" or less use upper spacer only and for chisels greater than 1/2" use both spacers. It seems to indicate that a chisel larger than 1/2" could be used. They didn't really have a response to that. When I pointed out the max chisel capacity of 3/4" on page 6 of the manual, they said that refers to the diameter of the chisel SHANK not the size of the chisel.
Can anyone who has this model help me figure out who has the right story? I'd really appreciate it.
I also asked him if I couldn't use a 3/4" chisel to make my mortise, which chisel should I use? I really didn't get much of an answer from him. (I started thinking it might have been his first day on the job because we had a whole other discussion on the auger bit clearance.) From looking at other articles, it seems like it is best of you can use a chisel size that will have all four corners of the bit bite the wood. So I guess that means I need to use 5/16" chisel? If I used a 3/8" chisel, for the first cut all four corners would be supported by the wood fibers. When I went to make the second cut (3/8 + 3/8 = 3/4) only three parts of the chisel would be supported. Does that mean the chisel would wander?
I guess, I'll just make a few more test cuts but I would like to know if anyone else use a 3/4" chisel with this unit. And if they do, who is the manufacture of the chisel unit they are using.
Thanks very much,
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