Ok, then I did that wrong, but that is how I have always set it. I guess I got lucky before. I just spoke to the machine shop and they confirmed but said that most likely that did not cause the problem, but is a consideration.

Im going to see if I can drop the pan with the motor in the truck (maybe have to lift it a bit) and look at it and see if I can just replace the thrust bearing.

Also the machine shope echoed the possiblity of line pressure being too high...