Yes if you want to move the stem down you end up with the washers and steerer sticking up above the stem.
"Preload" is just a fancy way of saying adjusting. To adjust/preload the bearing on this type stem/headset you loosen the two bolts on the stem and use the bolt on the cap to loosen or tighten the HS adjustment, then tighten the stem clamp bolts.
I am sure there are dozens of videos on Ytube about this.
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“One morning you wake up, the girl is gone, the bikes are gone, all that's left behind is a pair of old tires and a tube of tubular glue, all squeezed out"
Sugar "Kane" Kowalczyk