Should you include the center part that contains the firing pin? I would think so since that is where the case head would hit.
YES
On another note my fired brass now sticks out .004 to .005 from the barrel with my Mike B. gage. So if my gap is around .001 then I would want the case head flush. Does that sound right?
Yes, flush or .001" above the barrel face to equal the bareel frame gap that you measured at .001"
It seems funny to me that before firing factory ammo was between flush and .002 above the end of the barrel and after firing it grew to .004 to .005 and that I would want to resize to flush or .001 above the barrel.
The fired case is showing you the amount the frame stretches under pressure. If you don't resize it back to frame/barrel gap the gun will close hard. It will also hold the barrel away from the frame that.004~.005" and the next time you fire it the case will grow a little more. In time as the case "grows" from only neck sizing it will not allow the barrel to close enough to push the inter lock and the hammer will not cock.
So use the full lenght size die and leave it up in the press some size the case and check it in the barrel keep adjusting the die down until the .001" is reached. If you look at the case you will be sizing the neck and just pushing/touching the shoulder enough to keep the "chamber" dimensions. It's kind of like partial/neck sizing.
Wouldn't I want it closer to what it ends up as to reduce case streaching?
Usually case stretching that will cause case head seperation is when the case is moved a great deal each time. Like .020" or more. Moving the case .003~.005 will effect it little or none.