.125" is a good target spec for total apply pin travel with NO Gasket or Spacer during the check procedure. You are doing it correctly!
To be completely honest, .176" would run for a while in most cases....... Forever in a light car like my Camaro, Way shorter
amount of time in a hard working plow truck.
What causes the loss of Rear Band apply on TH400/4L80E is the apply piston bottoming out against the case. The machined depth of the piston bore varies from Case to Case.
*Remove the apply pin & cushion spring from the piston.
*Install the piston in the case all the way to bottom.
*Measure & record the depth with a dial caliper. (Mark the point on the Case where your taking the measurement as the the bore is machined at a angle)
*Install the Apply Pin back into the Piston with the Washer & E-Clip. Leave the Cushion Spring & Spring Seat off for this test!
*Install the Piston back in the case along with your test tool, Tighten the check bolt to 55 inch pounds.
*Force the Piston down against the Washer.
*Take another Piston depth measurement at the same spot as before.
Subtract the two readings from each other......This will give you exactly how much piston travel you have before the Piston bottoms out against the case.
The CK spacer just prevents the Band from dragging on the Reaction Carrier which TH400's are notorious for, But can be used with a longer Pin than what would normally be allowed in a stock set-up giving you more "Travel to Bottom" distance.