There are lots of articles in boating magazines that talk about how to align the shaft, I suggest you read up on it. Doing it correctly is critical to a successful rebuild.

The best thing I did was to make fully adjustable engine mounts with six degrees of freedom in positioning the engine relative to the shaft...up, down, left right, forward and back. This has proven to be very helpful, and is recommended for a complex installation. Also, while you have the engine out, pull the shaft, prop, cutlass bearing(s) and stuffing box and rebuild these as well.
Installation:
Align the engine and shaft with a feeler gage between the two couplings. There is differences of opinion how much tolerance can be accepted between the two coupling halves, but definitely no more than 0.005 at the edges. The less the better. This is where adjustable engine mounts come into play.

I am using a Drive-saver, a flexable coupling between shaft flange and engine flange. It may help with an impossible alignment. Takes a lot of patience and time in probably a very uncomfortable position to do it right....but do it right you must!
Also, do it while the hull is in the water so that any distortion in the hull\engine bed is removed.

Good luck,