OK, so I had my engine rebuilt by a shop that rebuilds engines for race cars. My trans was rebuilt by a guy that does the same. My torque conv. was done by the trans guy. When I went to bolt everything together before dropping it into the car-which was pretty cool-there was a 3/16 inch gap between the flywheel and converter. The trans guy said it was ok to have that and I should apply spacers to it.Keeping the converter shoved into the trans. Keep in mind that the other side of the converter is seated in the end of the crank, so theres no room for it to go towards the engine. I have a 3/16 jamb nut between the two components right now so Im not loosing sleep with the modification but it just doesnt seem right. Should I forget about it or is there something wrong with this picture?

The converter should have a slight gap between it and the flywheel. The converter should then be pulled up to the flywheel with the bolts. You should not be using any spacers- that ain't right... If the converter is tight pulling into the crank, sand the converter's hub with some emery cloth to remove the paint or crud that is stopping it from pulling up more into the rear of the crank. If the converter is too deep into the tranny, it can chew up the pump at the front of the trans and cause some real problems.

The center of the convertor should not be touching anything. I think you have the flexplate upside down.

Normally, there will be maybe a 1/8" gap if the convertor is pushed all the way into the trans, and you pull it forward till the bolt pads touch.

1/8" min to 3/16" max is the proper range of clearance.

You absolutely do NOT want the converter to be bottomed out in the crank. I really dont think you can get the flex plate on the wrong way because there is a little "lip" in the center, but you never know. The "pads" that the converter bolts to should be facing towards the rear of the car.
It is possible that the converter was made wrong too.
Me thinks that you need to take it back apart and figure out what is wrong. I would not run the spacers.

Just my opinion,

When I replaced my Powerglide with a 700r4 I had a similar issue. For what ever reason (engineers please chime in) these flex plates tend to dog dish towards the engine over a long period of time. So the mounting points wind up further away from the trans. After all they are called "flex" plates. I replaced mine (unfortunately after installing the trans the first time) and all is well.

I had a similar problem years ago, come to find out the used crank I used had a bronze pilot bearing in it that wasn't installed all the way and it was hitting the center of the converter.