The proper position for the nylock nut is where the lower nut would be -- you want just about enough thread to show that you could screw another nut on, minus the space used by the lock ring. You will compress the rubber some, but dont go too far.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!