Dear Ian, The Stanley Dealer Bulletin number 133 dated 3/14/21 has this to say about rear axle spur gears: "With our New ground teeth" The adjustment of these new gears is at three thousandths. After this spacing has been made at one point, the differential gear should be turned, first, one quarter of a revolution to see that the distance is the same there: then another quarter for examination, and so on around to where the setting was first made. A slight variation due to the adjustment of the gear should be three thousands at the point where the teeth mesh most closley. This change (in clearance) can be made in earlier cars but we do not recommend it unless replacement of both gears becomes necessary."
Personally I have been setting both my differential gears, and also my engine drive spur gears at 0.005" with good success in all years of my Stanleys. It is better to be too loose than too tight. If your engine drive gears are too tight, they will howl at lower speeds. Too tight is hard on bearings. If the engine drive gears are set too loose, they will clatter at about 35 mph and up due to excessive back lash. Spur gears left clattering will eventually break spur gear teeth off. You can buy your own set of Stanley dealer bulletins from the Stanley Museum. They are invaluable.