UnStuck Block/Full Flow

[37Flat]

Finally found the problem. After the ATF and rocking didn't work, I kept taking off parts, try to turn it, take off more parts, etc. Took off the flywheel and and it turned! It had been suggested that too long of flywheel bolts would lock the motor, but they were fine. Then I saw it. The top fitting for the full flow oil filter is out too far and jammed the flywheel. You can see the scrape marks in the pic. At least it's not a stuck valve or ring.

My first reaction is to file it down, but that may not be the best idea. Someone had posted that they had the same system (Red's) and didn't use this line. I don't know one way or the other. Could use some opinions. Thanks