Ok the last two headsets were semi-user error but this one came to me wrong. Free bike not free of an issue or two. When I got this cruiser I could see the bearings and the guy said a LBS ordered the correct bearings. I couldn't get the race or lock nut to go any further. I really think the bearings are too small so what do I measure on the seat to order a new set.

Of course I can't be sure without seeing the entire headset assembled, but from what I see here, this could very well be the right retainer. Retainers are sold by product number or headset brand/model rather than size, and it's been many decades since I bought one, but I suspect this might be a #22 .

The alternative is to measure the diameter of the balls, and pack the headset with loose balls. No great precision is needed because it's probably 5/32" or 3/16". There's also 1/8" but it's not common in headsets. Balls don't come in sized between these, so if you can measure to within 1/32" you're in.

I don't really see the problem. The bearing appear to fit on the race nicely. Does it not fit into the cup? Bear in mind it is a low-end headset without much precision. It is not uncommon to see a fairly large gap between the cup and race when the two are mounted.

I've seen some on here say just put an o-ring in to seal the gap and I'm good with that. The bottom race and bearings fit just fine. I tried a bigger caged bearing and it slides down farther but doesn't fit in the cup. See pic, top is the OG bearings and bottom is the spare.

Ok here is a pic of the o-ring filling the gap, I'm not sure this will create the tight fit needed or that it will allow smooth steering. FYI the frame and fork are in the process of painting, should be ready to go by the weekend.

It's a simple mater to load the cup with a full complement of loose balls (then take one out) and see how the cup and cone fit together. Too large a ball and the cup/cone won't fit fully together, too small and they will fit too far together. Remember the ball diameter is different then the number of balls. Once the ball diameter is determined then the choice of retainer becomes much easier. But then you have already come up with a solution that is better then the retainer, a full set of loose balls. The only reason retainers exist at all is to ease factory assembly. One step opposed to 22 (or how many balls there are) to load the bearings in place.

You asked, then edited out (caught you) whether the balls would group, and you're right. I guess I should have mentioned that a loose ball headset uses more balls than your retainer has. Essentially you fill the race, less one if in doubt because a ball or two short is fine, but one too many is death (think blackjack, as close to the max as possible, but going over is bust).

You caught me lol but only changed my path because your idea clicked, I'm an artist not a mechanic

Basically the grease will replace the cage.

Maybe you can help me. Do you know anything about computer drawing programs? I'm looking for something to draw mechanical sketches (not technical drawings) and at the next level, animations. Any guidance or help from anyone will be welcomed.

I'm a painter, old school. I'll ask some of the engineer folks at work.

I suspected that, but figured I'd ask. You never know who else may see the post and pipe up.

Try this:
https://www.sketchup.com/products/sketchup-make

There's a free version and it's commonly used.

No one chimed in on the o-ring solution. Anyone know if that's really an option?

Yes, if you can find the right O-ring it's a nearly perfect solution for keeping windblown dirt out of a headset. If you ride in the rain, though, the O-ring fit becomes much more critical.