I bought this thing as a non-runner, frozen engine so I have no idea what was "working" before. I did the starter rebuild. I actually have 2 starters to work with, both have same measurements.
Using a tape measure, I measured from the back of the flywheel teeth to the mating surface of the bellhousing for the starter. Measures 2".
Measuring from the mating surface of the starter (either one) to the fully extended pinion comes to 2" as well. So I'm getting full depth from the Bendix movement. It should be engaging!
So, my guess is still either worn teeth on the flywheel, or wrong diameter flywheel, which I've never heard of.