I am running the UUC stage 2 steel flywheel with a cerametallic clutch.

I was wondering what the purpose of the "big washer" with the 8 holes was for? Is this simply just a spacer so that the securing bolts do not bottom out against the block? Or does it have another purpose?

Thanks,
Chris

It acts as a large washer under the bolt heads. It helps to distribute pressure from the bolts evenly and is also required to prevent the bolts from sticking through too far.

I found that without this spacer the bolts (torqued down) get a few more threads of grab and are still a mm or so away from hitting the block. Would it be a bad idea to run it in this configuration?

Yes, it would be a bad idea. UUC engineered the whole setup to use the exact hardware that's included with the flywheel.