Clutch engagement is not so much where your foot is, but when the clutch completely engages. Your crunching could be because, although your foot is completely on/off the pedal the clutch hasn't completely engaged/disengaged.
The fluid fills in the gaps and makes everything smooth in the clutch movement so if your fluid is dead then your clutch won't go on or come off as smooth as you move the pedal. The crunch could likely be your clutch has not fully disengaged (as it lags behind your pedal movement) but you've already pushed it into 2nd.




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