This is an interesting problem. I recently acquired a T/C Hawken that has the same issue... The forward edge of the hammer cup was hitting the nipple. The lateral alignment (side to side) was near perfect.
This rifle does have a short nipple, so adjusting nipple length is not the solution. The hammer swings in an arc that should align with the orientation of the nipple. The arc that the hammer swings through must have a slightly longer radius to engage the nipple on this rifle. Extending or reducing nipple length won't change its angle. Maybe changing the length of the cone would make a difference on some guns, but not this one. The hammer needs a longer reach, or throw.
So, you just heat the hammer and bend it up, right? It isn't that easy. I've done that with lateral adjustment, bending the hammer nose left or right, but bending it up is not so easy. It's difficult to explain, but the physics involved are different. I spent about two hours on this yesterday morning, and managed to get a couple of dings in the hammer that had to be ground smooth with the Dremel tool, and I bent up the cup in the hammer nose so it had to be more or less fixed by judicious squeezing in a vise. Meanwhile, the hammer nose did not budge. My propane torch was on the hammer for over half an hour, and was simply unable to get it red hot.
I put a new tiny grinder bit in the Dremel and cleaned up inside the hammer cup, flattened out the striking face, and make enough relief in the inside of the forward rim of the hammer cup that it now clears the nipple. It slightly "bumps" a percussion cap , but will encase it now, so it will work, after a fashion. However, I am not happy with it.
I got it out again earlier today and studied it, thinking I might even try cold bending. It doesn't need much. One millimeter would help, and 1/16" would make it about perfect. However, I just don't see a way to get enough leverage on it to bend it. I also considered heating the hammer in charcoal, which would absolutely get it hot enough, but then I would have to handle and somehow secure a red-hot hammer and then bend it without doing any additional damage to it. I'm not sure I can do that with the tools I have, but I'm still considering ways to do it.
The T/C hammer appears to have a reach or throw of 1-11/16", from center of tumbler hole to center of hammer cup. Dixie has a Manton-style percussion hammer with the tumbler hole spotted but not drilled, and a reach of 1-3/4". My plan, at this point, is to get one of these and fit it to the lock, unless someone can suggest a better idea.
To recap, "heat it and bend it" is a good suggestion. The problem is that this is not as easy as it sounds. Anterior-posterior hammer adjustment is a whole different problem when compared to lateral adjustment.
As brother
@Eric Krewson said in another thread recently, a lot of us read about things and offer advice based on what we have seen or read, without having actual hands-on experience dealing with the problem. I'm sure the OP and I both would like to hear from forum members who have actually dealt with this specific problem, and solved it.
Thanks!
Notchy Bob