Okay James,
I have done some research for you. My wife and I have an old 1999 Tacoma Extra-Cab SR5 4x4 V6 with a 5-Speed manual transmission, which we use as our house repair truck so it is a very useful tool. Yesterday, I got in the driver's seat of our Tacoma and looked at the location of both shifters, which will give you a basis on how they should sit. When the transfer case was in 2 wheel drive, and I went through all of the gears on the transmission, the closest the transmission lever came to the transfer case lever is about an inch when shifting from 4th gear to 5th gear. The transmission lever does not make and should not make any contact with the transfer case lever at all.
What drivetrain and engine are in your Tacoma?