Aligning the bell-housing is really a PITA job. But essential and rewarding when its all done.
Mine was 0.027" at it's worst point. It took seven attempts to get the alignment to 0.0015" run-out. Each attempt required loosening all bolts moving the bell-housing in the correct direction, then
torquing down
ALL the bolts and turning the engine around once again to check the reading.
I used a bell-housing alignment kit that came with two new dowel pins that fit the engine block and two steel collars bored to fit the dowels. The dowel holes in the bell-housing need to be drilled out to a larger (5/8" I think) size. When the alignment is within the specifications the collars get welded to the bell-housing.
In my case the results were better than needed, my target was 0.005" and removal and refitting of the bell housing resulted in repeatable accuracy. You can see some of my photos of this operation in my albums here on the Forum, or via the link I've pasted below.
Good luck with your alignment.
Arthur
Link to my build album below.
http://www.facebook.com/media/set/?s...1&l=4a4838b30a