Where in the regs does it say that pre 87 distributions from after tax can be taken from principle first and then from the earnings, whereas post 86 has to be taken pro rata between principle and earnings?

There are no regulations. It is in the Internal Revenue Code (Section 72(e))and Notice 87-10 (or 87-13 -- I'm at home and don't have my files in front of me!). Your plan document also has to have the right language . . .

Not many plan documents have adequate language to create the sparate accounts.

It is 87-13, Q&A 13. Note that the distribution must be greater than the pre-86 basis in order to do this (you can't take a partial).

Also, QDROphile is correct that the plan must have segregated that account balance at the time in order to preserve this feature.