Adam, I have the same grips on my 07 BA & it seems to me that the 1/8th inch gap twixt the grip & cable housing is normal as mine is the same way. As far as the "wiggle" goes, seems to me that is just the slack in the cables. Have you adjusted the advance/decel cables correctly? There should be 2-3mm (0.0787 or [3/32nds] to 0.1181 or [1/8th"] inches) of freeplay on the throttle grip itself.
there is the very slightest wiggle perpendicular to the centerline of the handlebars (in any direction) on my ISO's too, but that's okay as it needs to clear the bar to allow the grip to pull/push the throttle cables on advance/decel.
I was wondering how your carb tuning runs? I have the stock mains & pilots, w/AI removed, the polaris bellmouth & K&N in the stock airbox too, and haven't messed at all with the idle settings so far. I know I am running a bit lean, but it doesn't seem to effect accel at any rpm.
