I've been flustered by this process as well...

The flywheel has a little inverted vee (^) ridge that should fit into the slot in the locking plunger. What drives me nuts is that the plunger can rotate 360 degrees around, so I could never feel 100% confident that it would click into the lock position by threading it in and slowly rotating the engine until it popped into place. The CD manual isn't much help with this technique.

I ended up just eye-balling it, then when I thought the ridge was in the best postion, I threaded the lock-tool into place and rotated the plunger until it popped down on the ridge. This took quite a few attempts mind you...

Makes me wish MB would take a few tips from VW for an easier and more positive method for determining and adjusting IP timing (e.g. a dial indicator).