Follow up for the record - Used the spacer when I tightened the setscrews and it seemed to set up ok (Wont know if/how it runs for a loooong time)
I think the problem first time was that I didnt tighten the setscrews with the spacer tool while the torque tube was vertical, and the pinion and bearing got pushed out of place.
I have TClederman's spacer tool - let me know if anyone needs one. Thanks for the help!