Seems like I remember that there was occasionally a slight problem on some big blocks that some of the mini starters actually hit aganst the block and caused a mis alignment. Some slight grinding on the block was necessary? It varied from block to block, you now have adifferent block right? See if a piece of paper will slide between the block and the starter. If it is hitting the block it wont sit square with the transmission.
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This starter/727/converter combo worked fine with my last motor. Since the starter is bolted directly into the transmission, I don't see how the new engine would have made a difference (if the starter is to blame).
But there could be something that I'm missing...