Yep, that is exactly what I was referring to. That indent cut on the rear of the cam is there to deliberately secure the bolt open- via that plunger in the extractor assembly- when you are intending to work on the gun and need the bolt locked back. Kind of redundant on an M37, given the retracting bar can be used to lock the bolt to the rear as well. But, it's a standard feature. Now with your cover closed, the extractor should be guided well enough to not catch the cam, but slip under it. I'd be very careful about removing metal there. The cams are hard- or are supposed to be. Not sure what TNW used, as they used kits that were made up of many new manufacture parts. At most, maybe round the bottom corner a bit so there is no sharp edge, but you don't want to change the shape of the cam. It is a critical part of the feeding mechanism. Also, look at the plunger in the extractor. It should have a clean transition from the round profile to that flat on the top. Make sure there are no burrs that help it to get snagged on the cam. TNW got 50 new made M37 extractors from me, but they did the assembly from the parts I supplied. They probably had some original extractors too. I can't tell from your pics, but if there is no drawing number, no SAK or RIA marking, it's likely one of mine. They have never failed me.
With the cover open, it is common for the extractor to rise and catch there. Should't happen when the cover is closed. Make sure the top cover extractor cam (ramp) and the cover extractor leaf spring are in good condition, as those are what keeps the extractor on the path through the side plate cams.