No installed a NEW pump and a Ford Racing Pump Shaft (chrome moly). I would never re-use a pump or shaft that failed..common sense
Found out what the issue was, when I put in the MSD distributor it went all the wat down no problem, however the end of the distributor was pushing the retaining clip down all the way making pressure against the pump taking all the clearance away.
It seams the ARP shaft has a smaller relief area on it then the FMS shaft so you run into this issue unless you want to cut back the shaft on the $280 MSD distributor...which I did not want to do. The FMS chrome moly shaft is the same design as the ARP but has a longer relief area and is slightly smaller in diameter.
The oil that was in the motor didn't appear to be gritty at all, guess my magnet and magnetic drain plugs saved it all. SHould hav eit up and running late tonight or tomorrow.