It is ok for the output shaft to have play. The driveshaft will center it.
There have been a few articles on wiring up the lockup on the converter. Many places sell kits for that, but call a good HP tranny shop in your area and they will tell you how to do it. There is an article in one of my old hotrod mags by a guy out here in CA (I actually spoke to him, his shop is near my work). Otherwise, give bowtieoverdrives a call (or look on their website, they may have some details (when i spoke to them about it, they also recommended a switch on the brake pedal to disengage the lock-up in case of an emergency stop/brake. It is a very simple task ( I never did get around to doing it, but from what I read, it was very very simple). It does involve opening the tranny though (dropping the pan).
Hope that helps. Also, the Cable geometry at the carb is very important. Check out the Bowtieoverdrives.com site for details on their system. i've been to their shop and their stuff looks very legit!
Tim