"When reinstalling the steering arms and lower knuckle bearing retainers, be sure to install the appropriate shims.
I think mine were bone stock when I took them apart and there were no shims.
The rebuild kit came with a huge stack of shims. I at first put the knuckle back together w/o shims and found it was overly tight.
After asking around, the consensus seems to say 0.40mm (or 0.040" I don't know what units are used ) of shims is the right amount.
The factory manual describes a bearing drag measurement technique if you prefer:
Use a fish scale to pull on the steering arm until the break-free pull is 7-13 lbs.
Do this without the knuckle wiper seals installed, just the knuckle bearings.
Be sure to pack the knuckle bearings before installing them."

This says nothing about centering the knuckle.

And this came up for 09696-60020.
http://toyota.spx.com/detail.aspx?id=355