Ok. I think i see the problem. Bare with me. Its weird.
I took the housing off. And the shaft slide over the splines just fine. Then i slide the housing over the shaft while i had it off also. It slid over fine aswell. But once the output housing is installed, the driveshaft doesnt like to slide in.
In short. The output shaft is slightly offset more towards the top of the output housings hole. So when the driveshaft goes in, it actually hits the bushing at the 12oclock position, and there is a gap at the 6oclock position.
This pic shows i bolted the housing back on, and just butted up the slip yoke to the bushing. You can see no gap at the top. And a gap at the bottom.
So to determine if it was an alignment issue with the t/s housing mating surface, i bolted only the top bolt down. And still, no fit. I bolted each bolt on by itself also. And still the same problem. So the machined mating surfaces are atleast correct with each other.
So i just held the housing on by hand, and slide the slip yoke in and let the housing go where its comfortable. The housing tilted up just slightly to allow the shaft to slide in. In this pic you can see. At the 12oclock position of the parts mating surfaces, theres no gap. At the 6oclock position, there is a slight gap.
I was tired and came in for the night. It didnt occur to me till just now to check for a bent output shaft (by rotating it 180). I guess i will do that in the morn.
yay.