Re: how bad to replace engine
Measure the oil pan-to-transmission housing clearance using a feeler gage and a straight edge. Use the feeler gage to check the clearance at the oil pan-to-transmission housing measurement points (1). If the clearance exceeds 0.3 mm (0.011 inch) at any of the oil pan-to-transmission housing measurement points (1), then repeat the step until the oil pan-to-transmission housing clearance is within specifications. The oil pan must always be forward or flush with the rear face of the engine block.
I have a T56 bellhousing that I use for this....Install bellhousing, Push pan flush with it, Tighten oil pan.
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