Originally Posted by
Panthers007
Only if you find having the handlebars lower is more comfortable to you. Otherwise the spacer should be moved under the stem. Then pre-set the top-cap by tightening the cap down about 1/8th turn with your hex-wrench and then tighten your stem - side to side - to the manufacturer's suggested torque. Use a torque-wrench. Then your stem should have no play, and your handlebars should turn freely to the side when you lift the bike off it's front wheel and tilt it side to side. Don't torque-down the top-cap. Just tight enough so it stays put.
Most of the job is done with the stem.
Here's Park Tool on the subject:
http://www.parktool.com/repair/readhowto.asp?id=65
And BicycleTutor, of course:
http://bicycletutor.com/adjust-threadless-headset/
Ok again, I think you have also misunderstood the problem. I guess I'll have to post pictures to make this clear.
I'm NOT talking about the top cap, compression plug, bung, or whatever you want to call it. I DO know how to set the top cap and preload the bearings, I have built nearly a dozen bikes and never had this problem.
I'm talking about the UPPER COVER of the headset NOT the TOP CAP. The upper cover could also be known as the dust cover?? This is the cover that goes over the compression ring and covers the bearings. This upper cover is contacting the top of the headtube. **If my top cap was contacting the top of the headtube I would have a very serious problem because there would be no stem in between!!***