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You may not have the torque converter set correctly into the pump, creating a bind at the flywheel. If it's in right, the torque converter will sit way back in the bellhousing, and you will need to pull it forward so the studs go through the flywheel holes when the trans is attached to the engine. Another thing to check is the converter drain plug. It needs to go into it's flywheel hole, too. It's an item commonly overlooked, and it can get mashed against the flywheel, creating problems, too. Lastly, be sure you have the correct tooth flywheel for your transmission.
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Wayne
52 Mercury M-1
among other things
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