Valve Guide Seals and O-Ring

[sgordon]

I've got a '90 4x4 1/2 ton 5.7L Suburban and I'm in the process of doing an on engine valve guide seal replacement. I've purchased the after market Fel-Pro seals (SS-72526/72527) and have completed cylinders 1,3,5,and 7 but I'm left with a question about the function of the lower groove in the valve stem. There seems to be a hardened "ring" in this slot and I've replaced it with the rubber o-ring that came with my seal kit. It's just bothering me that that ring does not seem to be a very exact fit for this groove but it's the only place to install it. Of course, these are not listed in any of the manuals that I've seen.

Any idea if this is where this o-ring goes and what happens if I'm wrong?

Thanks!