I've never tried to do what you're doing, but I suspect you're right, there is not enough room inside the transmission casting to allow the clearance.
Two options I can think of:
1) grind away the clearance that you need if it won't require removing a lot of material. 2) go back to the 13" clutch. A non-turbo 401 engine will never make enough power to slip a 13" metallic clutch. Even if you put the turbo on it from the TW25, the 9700 did just fine with the 13" clutch.
Be advised that if you do go back to the 13" clutch, from factory at least, the 9700 had either more springs in the pressure plate, and/or they were heavier than the 8700. I don't have a clutch chart in front of me to verify the exact details. Stated another way, your existing 13" clutch would likely slip behind a turbo engine.