Based on all your replies I rang up an RTA technical inspector and asked about this. He said that the wording was very specific. It says that if "any part of the thread is not engaged" then the setup would not be compliant.
It does not make any mention of the wheel nut itself protruding - just that the thread is fully engaged. He suggested I go back to the examiner and discuss - sounds reasonable.
Based on that advice the wheelnuts in the picture posted by spudboy are 100% compliant as none of the thread is disengaged.
I will keep you posted.
Thanks
Tim

