A904 real seal questions

Does the driveshaft move forward and back more than 1" during normal operation?
No, not even close.

When I measured for driveshafts on my 68 and 66 Darts, both only showed about 1/8" - 3/16" difference from full compression to full droop.

Most driveshaft shops will have you insert the yoke all the way in until it stops, take a centerline measurement on front and rear u-joints, then subtract about 3/4". How much does your yoke go in the trans? and what is the difference between that and the first photos you posted?