Remove the bellhousing and knock out the factory dowel pins from behind using a brass or aluminum punch. Don't use a steel punch, especially on the driver's side pin, which is particularly difficult to knock out, because the steel punch will damage the dowel pin bore. The new Lakewood dowels are machined with an offset that relocates the bellhousing as they are turned with a screwdriver.
To keep the new dowel pins from rotating in their bores once everything's done, we drilled and tapped holes for two 10-32 x 1/4-inch long setscrews we picked up from the hardware store. Lubricate and install the new dowel pins with their slots aligned. When making adjustments, loosen the bellhousing bolts just enough to allow the dowel pins to turn, and keep track of how much the indicator needle moves as you loosen the bolts-take that movement into consideration when figuring the change needed. After you've correctly located the bellhousing, lock the setscrews in place with some thread-locking compound.
Here's a tip we've learned the hard way: Lakewood supplies some Allen-headed bolts for the bottom holes of the bellhousing. But you can't get an Allen wrench on the bolt once the trans is in the car, so we switched all six bellhousing bolts to 12-point fasteners from ARP. Now we can use a 3/8-inch, 12-point flexible socket or the box end of a 3/8-inch wrench on the bolt in the car. You can also see the adjustable Lakewood dowel pin that's been turned so many times it's pretty chewed up, but that doesn't matter once it's locked in place.
From all the markings on our diagram you can tell it took several tries to get this bellhousing right. It needed the 0.021-inch offset dowels and indicated within 0.001-inch when finished. Anything over 0.005 inch is bad news.
Perfecting the bellhousing alignment cannot be done on an ordinary engine stand. We used these Moto Feet.
Lakewood offers offset dowels in three sizes, .007, 0.014, and 0.021 inch. These can cure misalignments up to 0.052 inch; anything more and you'll need to have custom dowels made.
In case you're wondering how we got the indicator to fit inside the bellhousing bore; here's our secret. We removed the second arm from the magnetic mount and clamped the indicator in its place.