Z bar is not sitting flush! Anyone know why?

[BD70CST]

I have a 1970 4wd that's been having some clutch linkage problems. When I tore it down, I found that the z bar was not all the way up against the block. After looking a little closer, it can't because the z bar is sitting at an angle and can't sit on the ball brackets properly. It seems the engine is too low or the frame is too high...I need to make up about an 1/8 of an inch.

Could it be the motor mounts are worn? It's about 1/8 of an inch that I need to make up. Has anyone had this before? Thanks in advance.
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