It seems to me that there are two "hack" solutions: move the parts around so that some overlap, or apply a non-uniform scale factor to one or more of the parts (squeeze it). I have attached two modified versions of your test model that do just that.
The "overlap" one has both the gray technic locking bushing and the blue technic toggle connector positioned such that their locking portions protrude into the adjacent red pieces.
The "squeeze" one scales the technic locking bushing by 0.9 in the Y axis. This isn't too visible when viewing the model, but it allows everything else to line up (after adjusting its location, which I also did). Note that this solution causes LDView to spit out a warning about the part being transformed non-uniformly, but, in my opinion, looks better.
The "overlap" one has both the gray technic locking bushing and the blue technic toggle connector positioned such that their locking portions protrude into the adjacent red pieces.
The "squeeze" one scales the technic locking bushing by 0.9 in the Y axis. This isn't too visible when viewing the model, but it allows everything else to line up (after adjusting its location, which I also did). Note that this solution causes LDView to spit out a warning about the part being transformed non-uniformly, but, in my opinion, looks better.