8 3/4 gear set up help

Thanks guys, lots of good info. I am using the ritchard (sp)depth setter, that goes off the race. But you can also lay a staight edge across race, and measure down and they are both the same, I mean exactly to the thou.
I am going to do what everybody says, go back.and start at correct pinion depth.Which I have done twice.I think it is too deep.I am going to work with back lash.
Sure would like to find out what the yellow goop is, prussian blue is too hard to read. I also tried paint, and white grease with no luck..
Thanks Guys