What did I do wrong?

Probably has to do with the 742 came with the Dana Clutch SG. It is somewhat smaller in diameter than the cone SG. But after building these for many years, I can't say I have ever run into the interference problem your having.

Thanks for the insight you win the "chicken dinner".

I remember when moving from GA to FL I had to put the original 489/3.23 back in. When I got to FL I could not find the rub spool cause the roll pin was always loose. Frustrated I put the 4.56 ring gear on the cone center from the 489. Bet if I choose a 3.73 or higher to put in now I would have never even had this issue! What are your thoughts on shaving the 3.55 pinion? It seems to contact or almost contact right on the edge where it is chamfered furthest from the ring gear. The power lock is long gone and a new one is $600 pricey!!! Not really interested in a used one that I have no way of trusting. The cone came out of my 28k car and maybe has 35k of use now so I trust it and it has always been tight!