if you remove the cap and loosen the pinch bolts the entire fork is now loose. Don't do any thing to the Star Nut (wedge inside steerer tube). remove the face plate and from the stem so the stem can be flipped 180 degrees without turning the handlebars over.

The reason to flip the stem is to have the stem angle turn upwards instead of downwards as it is presently shown. You cannot just add spacers to the bottom of the stem since the steerer tube is already near the top of the stem and it is not good to have more than a couple of mm of space at the top of the stem. Now if you need raise the stem more than a the 0.5" rise (this is just a guess) that you will get by flipping the stem there are a couple of options.

1. get a threadless stem raiser adapter

2. get a new stem that has a greater angle so the change in angle will raise the stem further.

also look at the park tools web site on how to install a stem.

How much flipping the stem will raise the handlebars depends on the current angle of the stem (if it is 90 degrees, you will get zero rise) and the length of the stem. (simple trig problem)
from the looks of the photo it appears not to be a 90 degree bend, more like 6 degrees (so that would make it a 84 or 96 degrees).