Block out of square

I wouldn't use shims at all. The thing that gives the mating surfaces all their strength is the fact that there is so much mating surface (area). If you shim it it will greatly decrease the amount of mating surface. The total stress put on the bell housing surface (which is the weakest surface) will be transferred to the area around the bolts as opposed to the whole mating surface.

...But I already don't have much surface. This is a picture with the block plate on, the bell has the same outside shape as the block plate. As you can see, much of the surface of the bell has no contact with the block at all. Bell is here. Your thoughts were the reason I originally thought of building a half-moon shim the size of the face of the bell, to ensure there was contact everywhere. But as you can see from the photos, even if I did, most of the face has no contact. ... So either this is ok, or I have an incorrect bell?

You can't machine the bell or you'll throw out the trans/drive-line alignment.

But... It already is out of alignment, right? If the bell is built properly, it will ensure that the front face of the tranny is perfectly parallel to the rear face of the engine. Since the back face of the engine should be perpendicular to the crank, and the input shaft of the tranny should be perpendicular to the face of the tranny, then all this together means that the input shaft of the tranny and the engine crank should be perfectly in line.
But if the back face of the engine is out of square with respect to the crank, then putting a good bell on that out of square surface will in turn result that the tranny is out of line with the output of the motor. Machining 40 thou of wedge into the bell would realign it by making it equally but opposite out of square -- But, agreed, at that point, necessarily means that block and that bell are mated for life, which is not very elegant.

I agree that fixing the block is the ideal answer, but... I should have said up front. If it was just the block, great. But this is a crate engine, fully assembled, already dyno tuned, ready to drop in... Except for that out-of-square bell mounting flange. :( The idea of tearing it completely down to the raw block, machining, and reassembling the entire engine from scratch is... Well, it's certainly the most correct way of fixing it, but the amount of rework there is unappealing. :P