04 LJ Ls swap with GM NP241C/4L60E

[mdbs14]

1) you need good engagement of the splines and no binding on the splines, case or shaft - no bottoming out. It should "float" there engaged on the shaft. You are probably fine but just watch for any binding. You could put grease on the shaft/gear and see where it witnesses to.
2) The reluctor should be centered on the sensor or close to it. Centered will give a stronger more consistent signal.
3) I am not familiar with that adapter specifically. The 4L60E speed sensor is not position sensitive, there is no location index. The extra hole might be to allow for clearance issues one side or the other. Is there a plug for the extra hole?

The tcase shaft internal bottoms at 2 7/8" on the tape measure. With the adapter installed, tcase bottoms at around 2 5/8 (going by the grease mark) which is the length of the outer part of that trans shaft.

 

[UNSTUCK]

Place the sensor in the side of the adaptor that fits best with your set up. There should be a plug in the kit to plug the other hole that won’t be used.

 

[mdbs14]

Place the sensor in the side of the adaptor that fits best with your set up. There should be a plug in the kit to plug the other hole that won’t be used.

I did find the plug while cleaning.