So, I generally get asked this question two or three times a week, as it is one of the more complex installation procedures of one of my GR series transmission kit installs. With a T56 Magnum you have to use a hydraulic bearing for clutch operation, and these can be a little intimidating to setup properly. 

Hydraulic release bearings require an air gap when initially installed. Normally 1/8" to 1/4", so I generally shoot for about 4mm, or around 3/16". A good thing to note is this air gap will only be present BEFORE bleeding the clutch. It is normal for this air gap to disappear after the bearing has fluid in the system. The bearing will contact BUT NOT PUT PRESSURE on the fingers of the clutch during normal operation. So, if you are doing a re-install of a used bearing, make sure all the fluid is out of the bearing and that the bearing movement is at it's complete backed out position.

From doing so many of these installs, here is what I found to be the easiest, and most accurate way to get the bearing gap set perfect.

1. Install the clutch completely, torquing down the pressure plate to spec
2. Install the bell to the block. Torquing it down as well making sure it is completely flush.
3. Measure the distance from the face of the bellhousing to the tip of the clutch fingers. Use a straightedge across the bell, and a micrometer to measure the distance.
4. Next, install the bearing onto the transmission. Take the straighedge and hold it across the front of the bearing, keeping it level and measure from the straightedge back to the face where the bellhousing will mount.
5. The final location for your bearing face should be roughly 4mm less than the measurement taken from the first measurement on the clutch fingers.

Improper gap can lead to clutch slippage and failure, or bearing failure from overextending its operating range. Too little gap will keep constant pressure on the fingers, which can make the clutch slip, and wear down the surface of the fingers. Too much gap will allow the bearing to slide further than it's intended too, and if it does this it will lose its seal and puke fluid all through your bellhousing. So, do this once, and do it right.

Hopefully this video helps a lot!