I measured mine like this. At the center of the tooth on the heel. I'm not sure if it matters but these are used gears.I'm no expert, but based on my experience with wear patterns on gear flanks, that shows decently distributed contact. I assume your measurement of .007" is the deflection at the center of the tooth flank on the ring? In which case, I would say that's very respectable.
I bought a whole diff from a man i know who parts out c3 and c4's so I'm not sure about any noises. My case was really worn on the driver side where the axle stub goes in.ok, keep your present pinion shim, set the lash to 6-8 and apply load when patterning them. Did they make any noise before you took it apart or did you buy used gears? Keep the paste like mayonnaise you can thin it with gear oil and mix it.