*facepalm* Fixed it. Seems the shop did not seat the bearings all the way, so it appeared the spacer was too short. On a hunch I rigged up a low-rent "bearing press" (front road QR skewer and random spacers) and was able to take the slop out. Tightened up the axle as it should have been from new and things are tight. Dinged the bearings in the process, once they are replaced should be good to go.
Disturbing thing is that the bearings were not completely seated initially from the factory. Three years of head scratching put to rest in a few moments of blind desperation. Duh. At least it's a happy ending.
Thanks for the advice and assistance all!