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It's possible just the outer ring on the balancer has slipped. This is a semi-common problem. If this is the case, then you just have to replace the balancer with a new one. This is much simpler than having to fix a sheared key. There would be no need to remove the timing cover and gears, just pull the balancer and replace it.
Mike
Slipped balancer hubs are very common. I recently posted a picture of a slipped balancer hub from my LS-4. Here's the picture:
Best way to check the harmonic damper if you do not want to do all the work to pull it off is to use a screw-in piston stop. Jegs sells them for maybe $7 or so. You screw it in the spark plug hole and turn the engine over by hand until the piston contacts the stop. You mark a line on the damper where the zero is on the timing pointer. Then rotate the engine in the other direction and get the piston to contact the piston stop again from the other direction. Then you make another mark on the damper next to the zero on the timing indicator.
If the factory timing groove on the outer ring of the damper is exactly between the 2 marks you just made on the damper, the damper is not slipped. If the groove in the damper is not exactly between the 2 marks you just made, you need a new damper. Fast, cheap and easy.