I have extended length shackles that had two sets of holes. I reversed the shackles to use the holes 3" apart and now the rear spring eye just touches the frame rail as the spring moves back and forth. How much space should there be between the spring eye and the frame rail?

If it hits the frame rail at all it is likely to affect the spring rate a LOT.
David

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Check my web page for First Gen Camaro suspension info:
David's Motorsports page (http://ourworld.compuserve.com/homepages/David_Pozzi/)
First Gen Suspension Page (http://ourworld.compuserve.com/homepages/David_Pozzi/first_gen_suspension.htm)
67 RS 327 original owner. 69 Camaro Vintage Racer, 65 Lola T-70 Chev SB Can-Am Vintage Racer

I just did a quick measurement of a factory shackle, it measures approx 3 1/8 center to center of the bolts.
Are Your bushings badly worn?
Something is not right, I don't have an assembled car to look at, but, the spring eye shouldn't be hitting. There should be some amount of gap.
Maybe someone else can give a quick look at their car and give Ya' a measurement.