Solution:

Removed chain from engine by just cranking it through. Dropped magnet on string to crank sprocket and cranked 360 deg. Fished out string and connected to chain. Fed chain to sprocket and cranked through until equal lengths were showing at the mating surface of the top and bottom front cover. Chain now connects over cam sprockets, so something was wonky down in the hole. Not sure what was causing the problem, but I think that the chain was mis-aligned on the bottom sprocket preventing it from engaging the sprocket properly and appearing to be too short. I don't think that the chain was threaded improperly as previously suspected.