The Chevrolet Truck Repair Manual lists the different shims available, but has no diagrams as to where it goes.
Its purpose is to ensure that there is specified end play between the inside end of the axle shaft and the block in the center of the carrier (.014"). If gap is nonexistent, you'll have too much contact with the block. if you have excess end play from too thick of a shim, the shaft end would likely hammer that block pretty good, or the c-clip could fall out.
They state that it is very important that the end of the axle shaft needs to be smooth. This indicates to me is that there is normally some contact between the end of the axle shaft and the block. I have seen evidence of this on every block I have removed from a number of torque tube axles.
