Kris, why did you remove the TC from the tranny and bolt it to the flywheel/drive plate?
This will complicate re-mating of the bell housing to the engine, and perhaps endanger the tranny pump while jostling & aligning the engine/tranny into fit position.
When I unbolted my engine from bell housing, I left the TC attached to the engine drive plate, and pulled the whole works straight forward under a hoist. This was a mistake and may have buggered the tranny input shaft, but in any event I had lots of trouble mating the TC to the input shaft/pump when I had the bell housing bolts in. Having done this, I then went back and read Bentley correctly, as well as factory manuals posted by Shogun, all of which I should have studied before I touched the first bell housing bolt.
In retrospect, I sure as hell wish I'd left the TC mated to the tranny, and unbolted it from the drive plate via either of 2 access holes in the engine and oil pan for that purpose. With your whole engine and tranny out of the car, this is a piece of cake, whereas in the car it's more work.
Given where you are right now, I suggest taking the TC off the engine, make sure it has proper fluid level, then make sure it is properly mated to the tranny, a two step process. First, it slides sort of into place, with those slots on the rear TC tube mating. At this point, you may think it's mated. It may or may not be, so rotate it back and forth, with some pressure aftward, and see if it slides another ~1/8" aftward. Then, rotate back and forth some more to make sure.
But, while apart anyway, replace that seal. Cheap and easy where you are right now.
And, had a chance to check the wiggle room on that input shaft yet?
Dash01
'90 535ia 272K miles