Hydraulic Lifter Preload Trouble on 68 289

[MrFixIt]

I've gone through the process of setting the lifter preload on my 68 289 a couple of times as I hear some valve tap. Every time after going through the procedure, the engine runs rough and I end up backing off on the preload. The engine smooths out once the lifters get back to zero preload for some reason. I've tried 1/8, 1/4, 1/2 and 3/4 turn preload settings, all with the same result. It barely ran at the 3/4 turn setting. I determined #1 cylinder TDC by the rotor position, and found the pushrods with no preload so its likely I'm in the right position.

Could there be a problem with the lifters themselves?
Could this be a valve issue?

Any help would be appreciated.