So I took off everything, and the headset is not flush against the steerer tube, it just sloshes around. So I thought, check another bike. Took off the stem and spacers to one of my road bikes, and what do you know, on the inside of the plastic headset top cap is a metal spacer/shim of sorts that is snug between the steerer and headset. Tell me thats not the problem, Im guessing that is the issue, back to the bike shop for the rest of the headset.