When firing this setup at 25 feet I get a group that looks more like a shotgun pattern at 25 yards.  Is this normal for this setup?

I'd say yes, when shooting typical 38- or 40-grain bulk pack out of the 1/9 barrel. I can manage 3-4" groups at 25 yards. WIth the same rifle shooting .223, it's 1" or smaller groups.

1/7 barrels are even worse. If you want more accuracy, either get some Aguila 60-grain SSS ammo, or get an A1 1/12 barrel (or both).

I would try some other ammo. I know in mine there was a pretty good variation in groups at 25 yards depending on what I fed her. The Wally World Federal bulk ammo works in all my rifles but does the "shot gun" groups. It does it in my conversions but also in a Ruger 10/22. If I use CCI Standard Velocity everything changes...for the better. Hard to believe how much difference it makes. Give it a shot.

I was shooting some ammo that came in a white box, name Wildcat.  I've had this ammo for quite some time.  I think it is standard 40 grain hi velocity ammo.  I do have some CCI standard velocity, I will give that a try.  I don't think I have any of the heavier stuff but will check at my gubn store to see if they have it.  If so will give that a try also.

Thanks for the replies.