Sound like the wrong starter? Too far away!
 

Well, without any shims, the space between my starter shaft armature and the flexplate teeth, is ¼". It's SUPPOSED to be 1/8th". Might I have the wrong starter? Kragen's said this starter is the right one for my application, but it's not the original motor/flexplate, so my thinking is that maybe the new flexplate is a 168 tooth and my starter is for a 153 tooth. Any ideas?

Two entirely different starters. One won't work on the other application. The 14", 168 tooth flywheel uses a offset bolt hole nose piece. The 12-3/4", 153 tooth flywheel uses a straight across bolt pattern on the nose.

What size is your flexplate? This determines what starter you need.

It looks like you need to do some shimming.

There is a very complete tech article in the August edition of Popular Hot Rodding. Several pages with illustrations. Good explanation of how and why to shim, importance of correct bolts and the starter brace. Lots of pros don't know all the stuff in this article.