Could the problem possibly be with the extension housing on the transmission? In other words, if your extension housing is off a newer transmission that is designed to mate up to a newer transfer case, the transmission mount location could have been changed.

The reason I'm asking this question is that I've been told the output shaft on the 203 transfer cases is a different length. If the output shaft is different, could the extension housing be different as well?

I have never heard of such a problem. If you find it is a problem of parts being incompatible, I'd appreciate if you would post what you find. I may have a big block swap in my future as well.