You have a 1" threadless steerer and a 1-1/8" stem. The 1-1/8" to 1" shim that goes between the steerer tube and stem is missing. You MUST get one or purchase a stem that fits a 1" steerer. The compression plug is used to set the headset preload and the stem bolts then are tightened to hold the setting. After that the plug is not essential but does keep water, etc, out of the steerer.