Setting the pinion height is critical to the correct operation of the ring and pinion, if this height is not correct the contact bearing surface will not be in the centre of the tooth and this will cause noise and less than optimum strength.
Backlash is also important in the noise/strength equation, this is different for each ratio e.g. for the 4.11 this is .006/.008ins
The final check should be made using "blue" and should show a contact bearing surface half way between root and tip and towards the inner end of the tooth on the crown wheel (ring). Under load the contact bearing surface will move along the tooth towards the centre but stay half way between root and tip.
The pinion height is "nominally" correct as is. For first fit us existing height shim i.e. the one under the large bearing, set the pre load and backlash then use "blue" to check contact pattern. Good contact is far more important than any height measurement. Please check our web site for further details of contact pattern. The pattern can be moved along the tooth by adjusting backlash or if the root/tip pattern is incorrect the
pinion height will need changing.
The nominal height of the pinion as measured from the journal bearing centre line and the top of the pinion is 3inchs for imperial and metric diffs. On the top of the pinion will be a number which is the correction. ie ie you see -0.010 this implies the correct pinion height is 3 inch minus 10 thou. It is still a good idea to start with the original shim.
Remember "only the blue is true" anything else is fiction.
Ideal surface contact.

High contact, pinion set too low will cause noise and excessive tip loading on the crown wheel.

Low contact, pinion set too high will cause noise and excessive tip loading on the pinion.