When setting up gears, look at the curvature of the contact pattern and where the pattern lays in relation to the peak and valley of the ring gear tooth, NOT where the pattern lays in relation to the inside and outside diameter of the ring gear (heel and toe).
If backlash is around 0.008″ and the pattern curves TOWARD the root (valley) of the gear teeth, the pinion is TOO CLOSE.
If backlash is around 0.008″ and the pattern curves AWAY from the root of the gear teeth, the pinion is TOO FAR AWAY.
An ideal pattern is wide and oval shaped with feathery edges. It will not have a sharp edge that curves in or out.
Here is a good link on the subject. Pattern interpretation is toward the end of the article: