I ripped apart two HEI (non-ecm), cleaned, polished, and tested every component, but there is still one problem I have before I can put them back together. I noticed when I pulled them apart, I noticed under the pickup plate, and under the felt washer and its holder, the area around the distributor shaft bore, was filled to the brink with some sort of reddish clay-like substance.
I have no idea what this stuff is, and wonder if it is crucial. anybody...?

 

I think that is the remains of the OE grease

 

Would it hurt to fill it up with grease? If not, what type?

 

I would use a di-electric grease or a silicone paste.

 

silicone paste... as in rtv sealant?

 

Not the silicone sealant, silicone paste is a grease/lube that can be used just about anywhere. I use it for probably about a million and one things at work.