Cullen - I may just have to do that, I am going to need to get some new longer bolts to make up for it and have enough threads in the aluminum mounting block. That will bring the starter motor away from the aluminum mounting block.
Richiehd - gear mesh depth (backlash) is not my issue, the starter and flywheel are too close together. If the motor were running it would be turning the starter because the two gears are meshed without the bendix spring sprung (starter activated). Adjusting starter into another hole just rotates the assembly for frame/header clearance, I thought that might work too and tried that.
here is what it should look like