Even though a bit late and no further input from John White, I would like to comment here having recently had similar difficulty.
It is absolutely essential to have the N/S cover fitted first to position the N/S crank half: that is having its axis of rotation correct as provided by the fixed bearings in the centre and end cover. If you leave this N/S end cover off and then fit the O/S crank half and align its O/S shaft run-out to 0.001" there is nothing to say that the N/S crank centreline is correct as the N/S end is floating. Putting the N/S end cover on then will move the O/S shaft out of its alignment.
The manual says to fit the crank halves together and adjust the alignment with the O/S end cover OFF. Doing that, I could not get neared than 15 thou run-out, though I did not know to use the mallet to knock it into line.
What I did do was fit both crank halves with the N/S cover bolted up and with the centre bolt pulling the crank halves together but not tight. Then I fit the O/S cover, pull it up using the cover bolts and then loosen the bolts a bit. Then I tightened the centre bolt to 20ft.lb and checked the run-out, adjusted the run-out as necessary, tightened to 40ft.lb checked and adjusted again and finally to 60ft.lb. At this point (or maybe before, I don't remember) I found that the crank web was against the crank case preventing rotation. A hefty whack on the end of the crank moved it sideways to a position where there was at least 15 thou clearance all around and then fully tightened the O/S cover bolts. Checking again, I was at about .002 run-out but the un-evenness of the shaft surface at this point was such, I considered this OK. The reason I had to whack the crank across was because the bearing fit on the centre of the crank was tighter than it perhaps should have been and so was not correctly positioned by the N/S end cover. I probably had to tighten the N/S end cover bolts further after this.
Anyway, my engine runs nicely.
1960 Ariel Leader - Up and running again.
Series 2 Jaguar E-Type Coupe up and running beautifully again.