Tried that before I decided on the electrics. It only gave me a 1/4" more room which was about a half inch away from the fins at that point. Still made me nervous to run it. Especially if the fan flexed.
Like Inertia said if the engine is moving that much you have another serious problem. I'm running a Hayden clutch fan on my 408 and it only has 3/8" gap between it and the radiator. Been on there 3 yrs. (5000 + miles) with no issues and I run the crap out of it. Even race it at the track on occasion.
I also agree with the guys on the radiator shroud restriction. If you want to stay with electric fans I question your idea of cutting rectangular holes then covering them up with rubber flaps that can possibly restrict air flow some. I'm sure it'd be better than no holes but doubt it'd work as good as open holes. Why not get a good quality (no harbor freight junk) 1" to 1-1/4" hole saw and drill several nice neat holes in it. It'll look clean and work fine. Lot less work too.
Oh yeah, 38* total timing is probably considerably more than you need. I rarely have to run more than 34* total on a LA. That might also be contributing to the overheating issue. If your running 38* just so you can get the initial up to 15* that's not the proper way to do things.