727 Rebuild recommendations

That's very little for an old trans; it's still within factory specs. Tap it in with a hammer, then pull on it.
Just to confirm, you talking about the end play between the drive shaft and the fix part in this image? I measured again after tapping with the hammer and got about 35 - 40 thousandths. Again- very rough measurement with my caliper.

PXL_20210104_220804067.jpg