When sewing leather most people want as small of a needle hole as possible,that is what our chart is for.Your 42-5 has the barrel shuttle & you shouldn't have a problem sewing 207 w/a#23 as long as your bobbin tension is loose enough.As others have pointed out some times you might need a larger than recommended needle for stiffer leathers which also may require more foot pressure to hold on also.We do stock the 135x16 up to size#25.
One more thing are you sure you wrap your thread around the second tension 1 & 1/2 x?
We've done quite a few of them back in the day the 563 hook is taller so that is why you need to mill the upper part ,I forgot how much it was,but there's no grinding or anything underneath,as Grag said using a 563 saddle is the easiest way.
Loosen the small slotted screw & turn the hex-headed bolt that is like a worm gear.It's been a while since I worked on one & forgot which way is longer .
They had a couple of different models & of course the adjustment is different between them so show a pic of the lower area below & to the right of the shuttle.
The 42-5 has a lifting cam that lifts the feet underneath the end cover,the 31K47 has a cam on the top shaft(and rod on back) that makes both feet lift as they walk.So yes the both are spring loaded walking aka hopping feet.They both need the feedog to pull the outside foot back.The feet don't interchange between this 2-models the 42 & 16 class use the same feet.
You need more foot pressure to hold the leather down or try to hold with your hand as all machine won't sew correctly if the material is lifted while your sewing,if it's an old dried out piece of leather you need to oil or wet it to soften it up.
The group on FB is China Leather Shoe Patcher
If your going to sew leather the Juki 1181 wouldn't be a good choice as the feed dogs can leave marks on the bottom of the leather where the 1541S with needle feed & walking foot the teeth can be polished off & as they are not needed .
We've found on thicker leather do to nylon being stiffer than poly it sews better with less skip stitches.The poly doesn't make a good loop for the needle to catch.
Yrs ago we used to use air pump pulley off Chevy engines,the water pump pulley will work too it's offset,you drill holes & bolt it on the the original pulley.
On another topic, I hear Sailrite now makes a smooth feed dog for these machines.
It's nice to have it so it won't mark on the bottom but,I wonder if that would give consistent stitch length when sewing leather?