wow, i had no idea it was that much.
You can still ride with a fair bit of slack though, right. mine has quite a bit and rides fine on a magic gear
If your chainline is good you can get away with something like an inch of vertical play, if you're lucky.
The problems is that on bumpy surfaces the chain doesn't only move vertically, it whips about a bit sideways as well and if you're running with a very slack chain it's enough to cause derailment.
So, the slack chain doesn't only look crap but is a real risk to your health as well.
I tried the so-called "Magic Gear" idea but decided very quickly that it's a waste of time - for what you can buy a proper single speed frame for (or modify one that you already have) it's just not worth bothering with anything else.
The best idea for an existing frame that you don't want to modify are the Excentriker or Forward Components EBB converters.