I don't know exactly what you all have decided but:
http://www.parktool.com/repair/readhowto.asp?id=127
From this page:
If the headset is using bearing retainers, check the orientation of the retainers before installing. Retainers have only one correct orientation. The open side of the ball retainer should face the cone shaped race, not the cup shaped race.
And, if you're going to replace with loose bearings, make sure not to completely fill:
Grease cups to hold bearings, and place balls into cup shaped races. Leave a wide gap the size to two ball bearings, do not attempt to fully fill cup.