Dago

Just setting up my new bike but the problem is that I have a ~2mm gap between the bearing cup and the bottom part of the headset. It seems that the upper bearing cup is a bit too shallow since the bearing edge comes over the cup for 1-2mm. I'm pretty sure my bearings are the right way around and I have assembled it correctly. Functionally it seems to be fine, the gap just looks ugly. I thought about getting a suitable size rubber O-ring and lubricating it and put it in the gap to stop water from going in. What else can I do? Warrantying the frame is not an option.

DaveSSS 

I assume this is an IS standard integrated headset. The bearing goes in with the chamfered side down. It should be 41mm in diameter and 6.5mm thick. I'd take the bearing out and look for burrs or something holding the bearing off the 45 degree seat. Use some grease on the seat to verify proper contact with the bearing. The bearing normally sits flush with the top of the frame.

Check the bearing seat in the frame to see is it is removable (not likely) or bonded in place. If permanently bonded and the aluminum is thick enough, it may be possible to cut the seat deeper. Finding a shop with the cutting tools might be tough, but Park sells them.

The part sitting on top of the bearing is not quite normal either. The headset top section is usually the same diameter as the OD of the head tube with a rubber seal on the bottom edge. Thin shims are usually included to adjust the gap to insure that the seal doesn't drag on the head tube. There should also be an inner bearing seat pressing against the 36 degree angle inside the top of this bearing.

Is this one of those cheap no-name frames?

Dago

Yes the bearing is of the correct dimensions and its seated properly, just the bearing cup is too shallow.

There might be enough thickness to mill it down a bit but I wouldn't risk it, since the problem is mainly cosmetic.

Yes, the top section is just like you describe, it just doesn't show from the picture so well, the lower half of the bottom part of the stack is rubber and the upper part (with the text) is aluminum, which has part againts the headtube which press agains the bearing inside.

And yes, yes it is. I could always return it to the ebay seller, I think it even had some kind of a warranty but I don't want to risk getting nothing back since I can't change the feedback or cancel the paypal payment anymore. And anyway the frame should be in working order so its not that critical I guess.

DaveSSS 

If you can get ahold of an FSA headset top section, you might try it and see how it fits. The OD of mine is 46mm and the rubber seal is about 4mm lower than the flat surface that touches the inner bearing seat.