Update on the project.
The problem was either caused by the crank being bent or it got bent after the fact. Run out was. 014" on the clutch side. Measured with a dial indicator with the crank rotating in a set of v-blocks.
I ended up buying a used 036 case with crank installed. Put in new crank seals, bolted the cylinder on and vacuum/ pressure tested it. Got it all back together and ran/ tuned it today. It runs great and cuts wood like a champ.
Thanks for all the help and advice!
Ed