Excessive play in pinion in 489 case

This is my first rear end rebuild so bare with me. I am trying to set the pinion and started out with .030 worth of shims. I am using a solid spacer instead of the stock collapsible spacer. The solid spacer was bought from Nation Drive Train (Last item on the page)

When I assembled the pinion in the case and tighten the pinion nut I get at least .125 of up and down play with the pinion. The pinion and gear ring is an after market 4.10's From the old pinion I retrieved the spacer that was beneath the large bearing and used it on the new pinion. It is .030 thick

Both inner and outer races are seated properly. The old collapsible spacer measures 2.940" and the solid one is 3.010.

I tried using the old spacer without shims and was much better with little play.

What am I doing wrong?