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Goodyear welt gemming typically sits 1/4 inch inside the edge of the insole, so the seam will sit deeper underneath the upper. When handwelting you can choose where you cut the holdfast, you could even come out the edge of the insole and welt to that for the minimum gap possible.
Many lasts are curved under at the extreme forepart of the toe, just above the featherline. Some makers call that a 'snake head' toe.
If the last is made (or modified) to eliminate that undercut, then cutting the insole to follow the lines of the toe helps. You can't really cut it perpendicular to the plantar surface of the last.
It's hard to describe this whole process---that's why I said you would almost have to be a shoemaker to understand.