Shovelhead crank runout

Dan, as usual, has the correct answer. If seeing it in the service manual helps ease your mind, here's some info from mine. Note that the earlier stuff does not give a reading for measurement of runout with the wheels installed in the case, that happened later when the pressed flywheel assemblies started slipping, and the chain to gear cam drive conversions came out. If you're getting .0065 at the end though, you can bet it's about the same with the assembly between centers.

It's funny you mention the bushing, because that is something else I ran across--the cam bushing is sitting probably 1/8" proud of the boss, and the pinion bushing is at least that much low. Could the shaft being out of true cause it to work down, or was it installed poorly? I've never seen or heard this engine run, so I can't comment on how it sounds or any of that.

Can somebody help me understand what I'm missing here? Upon closer inspection I realized that even the picture in my manual of the gearcase cover bushings looks like what I posted, but clearly I don't understand what they mean by pressing them in flush with/against the cover boss.

yes, install flush, start drilling for the lock pin, press to full depth and then finish drilling to depth.
press in lock pin and peen the bush to retain the pin...

keep in mind if you replace a cam cover bushing, it must be reamed to size in alignment.

while this pic is an early pan (53 and a different bushing type) the pinion bushing must be reamed in alignment with the pinion bearing bore.
you will also need to do this on yours as well once the bushing is fully installed and pined.
same deal with a cam bushing...
sorry, i don't have a pic of this on a 70 and up engine.

Dan and Jason have good advice here. Pinion shaft bushing clearance is very important. A lesson I learned the hard way. I rebuilt the lower end of my shovel and set everything up to the tight side of the tolerances. The bushings in the cam cover "looked good" so I just bolted it back on. Less than 5,000 miles later, and over 100 miles from home on the way to a friend's house in Iowa, the engine quit running. Roadside diagnostics revealed a broken pinion shaft. (Aside to Dan, Rev Tramp was riding right beside me when this happened.)

It was a brand new American made part. I figure it broke because there was too much clearance at the bushing allowing the end of the shaft to wiggle back and forth as the cam pushed against it and the bearings were too tight to allow the flywheel end to move. Anyway, lesson learned. Don't do one bearing without addressing all of them. It hadn't been a problem before because the main pinion bearings were worn also so everything was happily slopping around together.

That said, if your runout at the outboard end of the pinion shaft actually is .0065 as you stated in your original post (which is what made me question the pinion bushing to begin with) then a .001 clearance on the bushing is going to cause the same kind of stresses that broke my pinion. You need to carefully check it before you just throw everything back together again. Where are you located? There might be someone local to you who could help.