Pilot bushing in the rear of the Crankshaft aligns and keeps the tranny input shaft from vibrating. It IS necessary and if you have the car apart that far and can see that it's bad, it is really simple to extract with the proper tool. I have a tool that I made. It's the handle off a broken ratchet. I cut the head of the ratchet off and the round shaft fits almost perfectly in the pilot hole. I shoved the pilot hole full of heavy grease and inserted the tool into the.. (JEEZ, this sounds BAD!) hole and whacked it with a hammer. The hydraulic force of the grease forces the pilot bushing out.
Place a ball bearing inside the pilot bushing hole, and use a tap of the appropriate size. As the tap cuts the threads it will push out the bushing, the ball bearing gives the tap something to rotate on. And it's not messy either. Give it a try next time, you will love it.
NO KIDDING! My highschool shop teacher told me that one while I was trying to pull the pilot bushing on my 62 VW Microbus. (How long ago was THAT?!?) It works really well on REALLY worn or ovalled bushings. The paper has to be dripping wet, and the cleanup in the general area is a bit easier than grease. The tap idea has worked for me in the past, too.