I don't think Holley will care either. Pretty sure the response would be; "A friggin eight of an inch?? Call us back when you have a real problem".
Don't think I will touch the k-frame. My gut says it is in the Holley mounts. And if a cutoff wheel and welder touch anything it will be those. I just have to decide if I want to delay the crossmember and tunnel work to do that or if I am going to ignore it.
I could save it for later; build the new crossmember and trans mount with some adjustability (clearance and slots) so that I can build it square now and put the new motor in right later. Not sure.