The gap is no real problem. The bellhousing is designed for a starter with a larger "nose cone" than the Permanent Magnet Gear Reduction (PMGR) "Vortec" starter you've got. I suppose you could blort a tube of RTV Silicone in there to plug the hole; or cut a strip of rubber and glue it in place to seal the gap. I wouldn't bother.
The moron who crammed the incorrect bolt in that starter needs to be "educated".
GM PMGR starters have 10mm bolt holes, but the block needs a 3/8-16 thread. 10mm is bigger than 3/8". Therefore, the starter bolts are "special", having a 10mm shank that tapers at the threaded end. The GM bolts are inexpensive, and they taper at the knurl, so the knurl fits snug in the starter AND in the block, just like they should. ARP makes similar bolts, but the knurl is sized to fit the block, not the starter.
ARP packaging, plus the Summit part number for the GM bolts
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