Since you've gotten this far, assemble it where it is the smoothest. Really... the bearing cups will only go in one way and operate smoothly. Either the "directions" were wrong, or not clear on how to assemble causing confusion.

For future reference, I'd suggest getting rid of the "crown race." Old style headsets like you have use a caged (or loose) ball bearing assembly where the balls ride directly on the crown race and the headtube cups. One of the problems with the "old" system is... if the races and ciups aren't perfectly concentric there will be rough/tight spots somewhere in the rotation.

Your solution of filing the crown race seat will produce as good of results as an LBS mechanic with the tools at his disposal. Good on you for that. However...

I'd suggest changing the (at least the bottom bearing) to a sealed cartridge bearing common to threadless headsets. They use a "crown base" rather than a crown race (we still call them crown races- but they ain't). The bearing assembly seats on the crown base. Machine either the crown seat or the base to provide an interference of .001".

If you have a threaded steerer, which I know you have, you'll only be able to retrofit the modern bearing to the bottom. That's where all the stress and contamination is anyway.

This conversion ain't gonna happen at the LBS. They aren't machinists. However it's so simple that having it done by a machinist won't be much more that having the LBS cut the crown race seat.