It's hard to tell from those pictures but if it's the plastic/rubber piece that just covers the upper bearing, then yes it's normal for it to be able to spin, but it shouldn't really be able to be wiggled up and down. BTW, that headset looks like the one I just had to replace in my Kilo WT after about 1600 miles. It was indexed so bad it was geting dangerous...especially riding with hands. Replaced it with a Cane Creek S3.

Roland