I decided to not to redowel the bellhousing. It is at the top limit of allowable tolerance. I didn't want to pull the engine to get the upper dowel. And also what #commando1 said.
However, when I was playing with the trans on the floor, I noticed something. With it in neutral, turning the input also made the output shaft turn. When I hung on to the output and turned the input, there was a lot of resistance there. Seems to me that should be free spinning. I'm thinking that could be the reason for the hard shifting.
Is my observation correct?