Well the imput shaft will have play up and down and side to side, but IT SHOULDN"T HAVE ANY IN and OUT. A 1/4" seems excessive though, I think mine had maybe a 1/16".
As for oil at the bell, it may be the rear of the pan. Were your bearing clearances opend up for use with that HI-Volume pump? I know my clearances were tight ant that HV pump was more trouble then it was worth, caused a lot of my gaskets to leak, swapping to a stock volume was the best thing I did.
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[b]12.16 @ 113.5, 1.78 60ft..no traction in the 90 degree