Thanks for the input, I'll try putting the engine in with the transmission in place.
Meanwhile - how tight is too tight? The engine was supposedly rebuilt two years ago, by the previous owner. WIth the plugs out and a splash of Kroil in each cylinder, it is very hard to turn the engine over (the only thing that works at all is the prybar against the flywheel teeth). It takes a lot of effort to get the flywheel to turn at all. Too tight for a (rebuilt) babbit-bearing engine?