Inspection of a 904 torqueflite

What makes the output shaft support west that way
I assumed it was the governor play.

All arrows mean the back and forth in that direction

I figured the governor moving back and forth with the sajng rings expanded

Was what caused that wear
From your pictures it is still hard to tell what you are looking at.
If the sealing rings have worn a groove into the output support, that could be normal wear. The play that you measured between the governor is just manufacturing tolerance imho. There is nothing there that should wear. The governor assembly just controls your hydraulics to to the trans when to shift. It is not a load bearing part.
I am waiting to see you inspect the roller clutch bearing and the journal of the output support where the low/reverse drum spins to see if there is damage there.