I don't know the lathe specifically, but that picture shows poor engagement. You can just see the spur gear teeth peeking through the bevel gear teeth. They're "hooked", probably workable, but it's not ideal.
I don't see a lot of room to adjust the fit of the existing gears. The upper gear will be fixed in space by the height of the saddle/cross slide. The gear below that, the compound spur/bevel gear, that is fixed in the up/down direction to match the location of the other bevel gear. Those two can't have their respective axes offset from each other. And the last (first in the power flow) has it's axis fixed by the leadscrew...
I do believe I see some wear going on there on the working faces of the upper gear, and from what little I can see of the spur part of the compound gear. I also see wear on the outside of the upper gear, towards the three o'clock position.
Are you able to watch these gears in motion? If so, does the poor engagement continue all the way around as they rotate, or does it increase or decrease at particular clock positions of either of the gears? I'm wondering (not knowing, just wondering) if there is something bent in there.