Pulled the engine in the 95 Legacy and managed to displace the TC. Thinking it is now fully seated but not 100% sure. If I were to run a straight edge across the front of the bellhousing, it would just touch the TC bosses, those raised areas the flexplate attaches to. For some reason thinking the TC should be recessed another 1/4 inch to be fully seated. so, is the TC seated as it now sits or does it need to go back a tad more?

sounds like you're right and it needs to go one more notch. in case i'm misreading, here's the definitive test:

 

compare that distance to distance of flexplate from engine bell housing.

 

when bolted together the flexplate and torque converter should never touch.

once bolted together there is a gap between them and the torque converter bolts draw the torque converter together with the flexplate.

search for "torqueconverter" posted by me,

and read the oldest ones first for a ''how to''

Supporting the weight at the front center is a useful trick.

 

It should look like it is just about to scrape the back of the bellhousing when seated, but measuring as suggested is best.

Got it all back together today. Didn't break the transmission so feeling pretty good about that.