This contribution deals with an experimental investigation of the optimization potential of Stirling engines and similar regenerative machines by an enhanced design of the cylinder liner and the seal. The latter is mounted at the bottom end of the gap surrounding pistons and displacers that separate cylinder volumes at different temperature levels. The thermal loss associated with this gap may amount to more than 10% of the heat input into these machines. Mostly, its design is reduced to an estimation of the optimum width by analytical models, which usually do not account for further relevant optimization parameters, such as a step in the cylinder wall. However, a recently developed, enhanced analytical model predicts that this loss may be significantly reduced by such a step. In this work, this design was realized and investigated experimentally according to this prediction by modification of the cylinder liner and the seal of an extensively tested laboratory-scale machine. The results confirm that such a design actually reduces the thermal loss substantially, presumably by reducing the cyclic mass flows through the open end of the gap. Additionally, it even improves the net power output due to a reduced volumetric displacement by the piston or displacer, resulting in smaller flow losses and thermal regenerator losses, whereas the pressure amplitude remains virtually unchanged, contrary to initial expectations. This has led to the remarkable conclusion that the design of most Stirling engines is possibly suboptimal in this respect and may be improved a posteriori by a minor modification; i.e., a reduction of the effective displacer seal diameter.