Does the axle end to the transmission have to be all the way pushed in or does it have to have a 1/8 gap...

 

Auto or manual? I only have experience with an automatic trans, but it should go all the way in. The clip around the end of the axle end should snap into place inside the transmission. You should feel this resistance when you try to pull it out. This may not be the best practice, but I always end up tapping the outside end of the axle with a hammer (Be careful not to deform it; Maybe thread the spindle nut on to protect it) to fully seat the axle in. You may have to apply inward pressure on the axle while tapping to take up slack in the joints.

 

small gap is normal