I just went out to look at the clearance I have on the rack and its about the same. I have never had it hit the rack and I've had 2 different racks in the car. I also have a staock 7 1/2" pulley.
No clue on what could be causing your belt problem. But I have problems when I have my AC belt on, I've torn up 2 of them. So far no problems with using just the alternator, AC delete, PS delete belt.
Did you get a new water pump before you installed the engine? Tapping the fittings would fix it but that would be a bitch on the car. I doubt any sealer of JB weld would really work.