So this past weekend we installed my fresh 509 into my 96 Baja 252 and alng with this it has a brand new Bravo HP transom assembly. For 2hrs we played with alignment and it just would not come into spec the alignment tool was hitting slightly to high and off to one side. When we started to get it in the motor was just not straight and the tool bound up slightly. In the process of pulling it back out I saw the inner race of the bearing move like it was spherical. We were able to reset the engine straight on the rear mounts and now the tool slides in like BUTTER!

My question is was something off and did I wreck the bearing or does the inner race move around on a gimbal bearing? I saw no way for it to go in until this moved and you can take the tool in and out with 2 fingers now.

The inner ring/race of the bearing spins. If it is well packed, it should have noticeable resistance.

A lot of the time, the bearing itself can be cocked to one side or the other. If you move the tool, the assembly will also move (up/down/left/right).

the center part of the bearing will move,if you can get the alignment tool in and out of the coupler with two fingers your alignment is good.

My fear is I understand the center part of the bearing spins but does it pivot as well? Yes when I say I can slide it in and out with 2 fingers it feels PERFECT! I'm was just worried I damaged the bearing and it will fail prematurely. Without that center moving NO way it was ever going to align though so I'm going to run with it!
I know a pillow block bearing the center race not only spins but it has a little bit of spherical motion as well I was curious if a gimbal bearing is similar.

When the tool slid through it was hitting the engine coupler more towards the port side and on the upper side of the coupler. After 2 hrs of playing with it we found the tool can change the angle of the bearing center then it went right in. we also sat the engine down with those spring looking sleeves between the transom assembly bracket and bell housing without tightening the nuts and wouldn't go. Tightened down the nuts and slide right in! This is my first time aligning an engine so it was a trial & error and I just want to be sure I didn't make an error LOL

Like Mike said, you're in good shape if you can pull out the tool easily. The bearing is fine.

I know I'm over thinking it! Thanks guys.

They are.
Matter of fact there are 2 grooves in the aluminum outer ring for the bearing "insert" to be installed.
They should face in towards the engine as per the service manual.
But the street trick is to install the bearing "backwards" so any further service you just spin the bearing insert in the aluminum and spin the new one in without any slide-hammer or beating the new bearing in.
Pictures below. The dot should face out, but no notches. The backside, notches.

Awesome thank you, I am going to do the grease test tonight to ensure I see the spline marking are 365 degrees on the alignment tool and that they are fully engaged tonight just s a triple check. But it slides in like butter and a hot knife. I can rotate it and slide it in and out holding it with 2 fingers no grab and pull needed. I'm sure I'm good but i know how critical this step is!

The direct answer to your question is YES. The bearing has spherical movement just like a pillow block.