I was able to grind off the very small amount that was sticking out from the crankshaft with the dremmel tool; it was only about 1/32 of an inch sticking out from the balancer. And yes, the balancer was seated all the way onto the crankshaft. I was very careful in making sure that the dowel pins were indeed seated into their respective locations because I wanted this job to done right and I didn't want the balancer coming off. The only thing that I was sweating during assembly was whether the crankshaft bolt would torque down to the 200 Foot pounds after chasing the threads with the 18MM tap. When the torque wrench finally reached the specified torque, I knew I was home free! I also put thread locker just in case.

I put everything back together and I resurrected her back to life! When I started the engine and heard her usual diesel clattering again, I was smiling.

Success!

Thanks for the input guys.

Herb
'82 240D
'87 300SDL
'92 300D 2.5 Turbo