That bolt should have a lock-washer on it. The bolt should spin freely until it contacts the pump bracket, then it gets torqued to 29 ft lbs. Once torqued the bracket should not move freely. It can be moved for alignment reasons (as you have the leverage to so), but you should avoid moving it more than necessary. Once the alternator is mounted it's not a bad idea to retorque.
Your suspicions are correct (that bolt is not the right one (too long), missing the washer, or perhaps the threads on the block are messed up with crud/whatever). This is an important bolt as it applies pressure to seal a major coolant port. This is the port that passes through the block, through the timing cover, and into the water pump area. If the bolt fails to apply the required pressure you could be asking for a blown gasket between the block and the timing cover (not a fun one to replace). To get an idea of how things go together here,
CLICK HERE and scroll down to the middle of that blog entry. Tim