To answer all questions... The key did not fall out as it was checked many of times. When the DE spacer went in(we were told this was ok) the UR pulley was installed and the oil light was on with no oil pressure. We then tried to take the DE spacer out, this was not coming out, a puller was made and the DE spacer was removed. Getting the VE spacer back on was fine and a new oil seal was installed as the previous one was damaged during uninstall.
When his car is at idle the oil light flickers off/on. When its anywhere above 1100rpm the oil light is not on. Whenever it is under a load the oil light is not on. I told him the best bet is to put an oil pressure gauge on the car and see where it is. PhorB13 was told by a reliable source that the DE spacer and UR DE pulley is ok to install on the VE motor, we found that this is not the case. The car drives great now with the VE spacere and stock VE pulley, the only time I see an issue is when it is at idle. The only way we are going to find out is with an oil pressure gauge. Then we can get real results and figure out if the oil pump needs to be replaced or not. But for right now PhorB13 has his car and is driving it, I put 200 miles on his car personally with no hickups, it actually drove great.
If anyone has any insight please post, but I checked the cover and it is not cracked... I checked everything we could see by eye and everything checks out. The oil pressure should tell us what we need to know.