I purchased a tub that was supposed to be 66", but it only measures 65 1/2. How do I deal with the 1/2 inch gap. I want to put tile behind around the tub but there is a installed flange on it. Back will work but what about the extra space on each side?

Can you help?

I purchased a tub that was supposed to be 66", but it only measures 65 1/2.
That is the standard. You have to have some room to get the tub in the rough opening.
The cement board, you are using cement board aren't you, fits over the lip. You set the tub up against the back studs and split the difference between the head and the foot. Secure at each stud with galvanized roofing nails. Drive the nails just above the lip and let the head of the nail hold the tub in place.

The 1/4" gap at the head and the foot will be tapered out over about a foot up the wall. It will be further tapered out when you put your tile mud or adhesive on.

If that slight tapering of the head and foot walls bothers you, set the tub tight against the back and head. Rip some 1 1/2" wide strips of 1/2" plywood and tack to the studs of the foot walls. This, however, should be unnecessary work.

Sorry to differ with your Harold but we do it a bit different. The cement board does not fit over the lip, it stops just shy of the lip almost butting to it, then the tile goes over the lip but not the cement board, this would cause a flaring of the wall ever so slightly. Your second option is spot on. The wall needs to ne shimmed out so the cement board can butt the lip