My guess would be the bushings in the distributer shaft are loose or the shaft is bent and is letting the shaft wobble around. The teeth are damaged on both pieces because they have come in contact with each other. Are all the teeth damaged, or only the teeth on one side of the shaft? Damaged teeth on one side of the shaft would indicate a bent shaft. Can you move the shaft side to side any? Side to side movement indicates worn bushings. Worn bushings allow the shaft to wobble and the damage could be any number of teeth around the shaft, or all of them. The clearance is only .080- .010 so it wouldn't take much movement for contact to be made. If there is side to side movement, or the shaft is bent, replacing the damaged ignition pieces won't be a long lasting fix. The distributor could have been damaged when the motor was pulled out, or put back in with the motor rebuild.

I somewhat disagree with the others, if the pickup has been damaged by the contact, (the reason for the chipped teeth was contact with each other) the pickup could be failing when it gets hot, or may still be making contact if the shaft is bent or the bushings are loose. If the shaft is bent, and just part of the teeth are damaged, the odds are pretty good the pickup has been moved (at the screws) and the distance between 1/2 of the teeth that are undamaged may be on the edge of giving a good signal.

The reason Mopar instructs you to use a brass feeler gauge is because both pieces use magnetic pulses to function. A steel feeler gauge could give you a false reading of the clearance because of the magnetic pull on the steel as you check the clearances. The magnetic pull wouldn't effect the brass feeler gauge so its easier to get a good clearance feel.

Send me a PM with a mailing address. Gene