Ya it is close to the teeth . maybe the answer to a safe rider would be to get a larger caliper to cover more rotor surface ??
Like fatBoy says the disc brakes suck for stopping. Ray @ Lil Indian even verified that years ago. It was more like a gimmick. Think about you have like 1 inch round pucks instead of a 4 inch brake band to stop you. On my Terra Tandem with the fast motor I am adding another brake to the jackshaft also as well as the brake in the rear sprocket. Just scares me because it pulls so hard and fast and brakes are not Hurst Airhearts.
I'd agree that it was a gimmick. Oil that chain once, and it's on the brakes. And yeah, about 2 square inches of stopping power.
The only reason to keep them and (try) to use them is to maintain originality. I honestly don't have enough engine on those bikes to worry about stopping power. Kids don't ride them, or I would be concerned.
One more vintage aspect is that the original drums and sprockets get warped, so even though they're true enough to hold the chain, tight, adjusted brakes rub. The sweet spot ends up being insufficient to do a decent job of stopping.
Like fatboy said earlier, use a clutch brake if you actually need to have good brakes. (On a Cat, that's your only option, if you retain stock wheels and don't want to install a jackshaft)
The best brakes I personally have experienced on a Cat are the scrub brakes.