Quoted: Heat it and the layers will separate a little... Then peel off layer(s) as necessary

This is the correct method.
Take a lighter or torch and delaminate one side of the peel washer.
Then use a razor knife to peel off as many layers as you require.

One complete rotation of the muzzle device is roughly 0.036" so (luckily), 0.001" equals 10 degrees.
Snug down the muzzle device hand tight against the peel washer.
Look at it to determine how much MORE it needs to rotate in order to align correctly.
Using the 10 degrees per 0.001" guideline, remove the necessary amount from the peel washer.

The difference between hand-tight and properly tightened is going to be about 20 or 30 degrees, so account for that as well or you will take off too much from the peel washer.

You install muzzle devices with a crush washer OR a peel washer, but not both.
Proper use of a crush washer is to just tighten the muzzle device against the washer until it aligns correctly.
The crush washer will "crush" as required.

You normally do NOT use a crush washer with a suppressor mount.
You need that mount to sit perfectly square and peel washers and shims are the way to go in that case.

The best solution is to have the shoulder of the barrel machined so that the mount indexes correctly with no shims or washers.
I offer this service for anyone that may need it done.

Here is the picture linked above as a reference just to be sure you are using the right terminology...

Quoted: The peel washer came in two parts like in Randall's picture. Does the thicker part (upper washer under "peel washer" in Randall's picture) peel as well? No combination of peel washer and shims will index properly on my barrel. . Even with just the peel washer the flats index to about the 1 and 7 oclock positions.

My picture shows a new peel washer (top) and part of a used one (bottom)

You just gave some useful information.
You have not figured out how to "peel" a peel washer yet.

Since the mount indexes at 1:00 and 7:00, it sounds like you need the mount to tighten on about 60 degrees more.
In this case, get your lighter, heat up the peel washer and remove about 0.004" worth of layers and then re-try the mount and see how close you are then when it's tight.

Quoted: This is what I have so far. img.photobucket.com/albums/v697/Loduss/peelwasher.jpg When I first got the peel washer, it came apart in two parts. The first part is the one on the left. The second part is compose of all the parts on the right. I warmed up the left part and it would not come apart. It appears solid. I then tried the second part and it came apart in to the pile on the right. With the left part and all the shims, the LMT A2 flashhider flats will be at 1:00 and 7:00 with the bottom of the A2 facing NW (looking at it straight on). Now if I remove all the shims and just have the left part, the flashhider flats will be at 1:00 and 7:00 with the bottom of the A2 facing SE. I just pulled off a Bushmaster A2 flash hider and it finally timed correctly with the whole peel washer. This LMT A2 flash hider just doesn't want to time correctly on any of my rifles.

Sounds like you need another peel washer then.
I hate peel washers so much that I would rather take apart a whole upper and just face the barrel's shoulder until the muzzle device torques into perfect alignment.