So I did lots of research about how to set up dana axles and most tell you to start with the old shims and then trial and error with setup bearings. Some reference the pinion depth number that is typically scribed into the pinion face (by the manufacturer when lapped with the ring gear at the factory) and tell you to adjust from your old pinion number, but if your old pinion isn't marked, then that doesn't work and you are back to trial and error. Then I read the instructions that came with my motive gears. It is actually very straight forward, provided that you have a way to accurately measure the pinion depth:
1. Set the pinion depth (distance from the ring gear axis to the pinion face) to what is says on the face. This is the way that the gears were positioned by the manufacturer when they were lapped as a set in the factory.
2. Set the backlash.
3. Confirm that you pattern is good.
I am doing the 35 first. Because the pinion depth is set by adding shims behind the inner pinion bearing race, a set up race is required (OD needs to be reduced so that is slides in/out of the housing easily). And because you have to remove the pinion to add shims, you should also make a setup outer pinion bearing (ID needs to be opened up so that it slides on/off the pinion easily). Here is how I made my set up bearings:
Disk sander to the OD of the race:
Small sanding drum around the ID of the inner race (I tried a bigger drum, but is was harder to tell if you were keeping it parallel to the race while sanding):
I also machined out an old pinion nut to make it easy to put on/off for setup.
Install the pinion with out the crush sleeve or seal: