Agreed it's way too big. if I was in your shoes, I'd get a new rear yoke altogether (if need be maybe someone could send you one from Aus if there's none available at wreckers yards over there) that has a 'front' on it that slips inside the gearbox 'sleeve' or cup (whatever you wish to call it) and a new tailshaft which is longer to suit it.
In very rough terms, you'd want about 0.5-1 inch extra room - i.e. if you push the tailshaft all the way into the gearbox (and it has to go all the way in, not just hit that sleeve on teh gearbox, in that case it can't 'ever' go in all the way do to the shape/particulars of the flange you have) - well with the tailshaft pushed all the way in, and the car at ride height, it should only be 0.5-1 inch forward from seating in the diff yoke, 1 inch absolute max
Another thing - due to the way universal joints work (as distinct from 'CV joints' whee the CV stands for constant velocity) - well believe it or not, since the uni joints are a cross and two way swivel, whilst the output shaft of the gearbox turns at a constant rpm, the tailshaft itself speeds up, slows down, speeds up, slows down and again, ALL IN ONE REVOLUTION - but because there's a second uni in front of the diff, it translates it back into constant velocity at the diff itself.
That's no big deal - it has been used and worked on cars practically from day one. HOWEVER - to enable it to 'translate' that constant rpm to the tailshaft (which is faster slower faster slower etc) and then translate it back to a constant diff pinion input rpm - well to do that, all it needs is two things. The first is that the tailshaft has to be made with the uni joints aligned perfectly, not even 1 degree out. Not hard to do, put in a jig and weld.
The second thing is a little trickier - esp in engine transplant setups. And that difference is simple - the gearbox output shaft angle and the diff pinion angle need to be the same at ride height. They don't need to be aligned (i.e. the tailshaft and yokes don't have to be in a straight line) but the two angles of gearbox yoke and diff pinion have to be the same (paralell) to one another.
If the angles aren't the same, it'll 'try' and make one end speed up slow down, speed up slow down, and that makes for a huge vibration, and no amount of balancing will help it.
You may find you either have to lower the gearbox rear mount (or raise it, if the floorpan space allows for it) or alternatively raise or lower the engine at the front engine mounts.
I do think that the biggest issue is how far out the gearbox yoke is from the gearbox, but I suspect you'll find that there's that angle issue playing a part also.
That might not be clear I'll do a diagram (admittedly a very dodgy one!)
The red lines are to show the angles are (or aren't as the case may be) parallel.
You can also alter the diff angle by either cutting re-welding the leaf spring perches, or using tapered wedges, though that would generally be a last resort, I guess. I mention it only because the spring perch clocking/alignment should be done when any diff 'transplant' is made to allow the angles to be right in the new vehicle (in a hypothetical situation any time a diff swap from a totally different car is done, so it might not apply here, I'm just adding it to cover all bases)
Transfer
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