I've already solved this problem, but as I found while Googling, these sorts of posts with pics can be invaluable to the next person who runs into this issue.
When I removed the steering rack, I had trouble separating the steering shaft from the steering column. So, I lowered the steering column and yanked on the steering wheel until it pulled apart. Little did I know that I had also pulled the lower part of the steering column's collapsible shaft out some in the process. Anyway, when replacing the steering rack, I had to lower the steering column and pull it back so I could get the steering shaft "tongue" into the steering column - pretty normal stuff if you've done this before.
So, the stupid steering rack was in, after I had to drive 15 miles to a different Autozone to get a different rack where the Chinese hadn't already pressed some bizarro bushings into the bushing tubes that I couldn't knock out with a sledgehammer. :punchballs: My T-Bucket, which had to be out of the garage so I could work on the Cougar, got drenched in rain because I had to wait until morning to finish the install :toilet:
Anyway, I could barely get the car out of the way of the garage entrance because I could barely turn the steering wheel. Couldn't figure out why the steering knuckle was now on the header whereas you can see I ground the shaft for a little clearance where it used to be close to the header tube:

I'm slow or forgetful or something, but it took me a couple of days and Googling to realize I just had to tap the end of the collapsible steering shaft back into the steering column to get me back to (about) where I was before. Still have barely any clearance, but I can try moving the engine and steering column a bit to increase the clearance to a acceptable amount:
Would this possibly help with clearance? http://www.maximummotorsports.com/Steering-Shaft-Assembly-Power-Steering-Rack-1979-93-Mustang-P980.aspx
It's a good question. They say on their site that it helps with lower universal clearance, but the upper area the shaft is the same size (square, but about same diagonal as round from what I've read.) So, unless it's more compact at the top, allowing me to extend the column a little to get a better angle around the header pipe, it's not clear if it would help or not.
I'd try shooting MM and email and see what they say.
I want to buy that part but it falls under the "I can't afford this category", unlike cylinder heads (which are more expensive) and I "can afford" :mullet:.