If you're indeed only an eighth of an inch away, I doubt it's the pump shaft misalignment not allowing the gears to mesh. If so, it'd be more than just 1/8" I would think. And as you've seen yourself, the dizzy is turning and the pump is pumping. If they're engaged enough for that to happen, then I'd agree with your assumption, and that of others, that something else is keeping it from seating.
I've heard of gears being in the wrong spot, of pump shafts being different sizes from the hole in the shaft, shafts being two diferent diameters (which may or may not effect the hole size) and maybe even a couple of other things as well. Like different block deck heights maybe? I would think that only effects the head location and not the distrubutor location, but hey, stranger things have happened!
Maybe try marking the bottom of the gear with something (don't have any Prussian Blue laying around by any chance, do you?) and see if it wears off when you turn the engine over. If it does, then the gear is seating against the block before the body is fully inserted.
If not, then maybe you can measure the depth of the hole in the shaft and compare it somehow to how much of the pump shaft sticks up beyond the block's thrust surface.
Not sure how you'd go about that last bit, but if you figure something out, let us know!
Good luck.
Paul