It does look like the locking nut is bottomed out.
[MENTION=63590]jyl[/MENTION], good question about the balls, I have been wondering the same myself. The only bearing balls I've found that I took out were 5/32 in. I'm not positive that the same size balls were used in the top and bottom, but haven't seen any other size balls sitting around with the parts I took out. I replaced all the balls with 5/32.

What's the best way to go about buying new spacers?