Starter not properly engaging flywheel

I've got a smaller aftermarket starter (factory starter won't fit with my headers) that is missing the flywheel every so often (I'm sure everybody knows that pleasant sound).
The starter gear is about a 1/4" away from the flywheel...is that the right clearance or should it be closer to the flywheel? I put in shims so that it was farther away but maybe it's too far, but before I shimmed it it would have actually touched the flywheel. To try and fix it I also put in shims between the starter block and the engine block to lower the starter a bit, about an 1/8". Didn't help though. The flywheel and starter are as new as the engine rebuild and almost everything else under the hood (4,500 miles on it). Is this an exact science or should I be able to manually pull the starter gear into position (I can pry it with a small flathead screwdriver) and if it appears to positively engage within the flywheel teeth am I good to go? This thing is frusterating because pulling the starter in and out isn't all that fun on this thing but it's not too bad considering, hardest part is holding it up there while I try to get the bolts threaded into place.

http://i121.photobucket.com/albums/o219/ernestmayhand/Caprice%20resto/0705081519.jpg

the teeth are to be 1/8in from the flywheel....too close starter binds...too far grinding noises..

if you remove power to the starter armature...then apply power to the solenoid [with a jumper] you can then check this clearance..