Thanks for all the feedback.
The new gator is installed and I ran it with the chute unobstructed but even if the clippings are smaller it still throws them quite a distance.  
I tried blocking the discharge and as stated above it just clumps.  I agree that this mower was never designed to mulch, but if I want to keep it I have to solve that problem.
I have a piece of heavy metal that i have radiused to about 15" and i plan to enclose the chute  so there is no room for the clippings to accumulate and clump.  this should make it like a mulching deck.  
My other  concern is the bar that deflects the grass towards the discharge chute. Will I have to cut the bar away so the underdeck is totally unobstructed?
Has anyone successfully made any modifications that resulted in making this a mulching mower?
My lawn is really too small for a rider and in some places the clippings either end up in the street or on the sidewalk/driveway if i can't contain them.