First, it seems funny that there's no washer. I can't remember if mine have them or if the locknut does double duty as a washer. I'm guessing you need a washer. I wouldn't expect it in the kit, you're expected to reuse the old one along with the locknut.

There's been many threads about setting proper preload, many in which I participated. A search on your part would be easier than my retyping these instructions all over again.

When seating, the point is to tighten it so it is difficult to turn the rotor, not necessarily stop it. If you got a significant amount of drag, then I think you did it properly. Otherwise, you bottomed out against the final thread.

I'm not so sure you set the preload properly. After seating, the locknut must be backed off until loose, then tightened barely finger-tight before locking the nut. Ideally, a dial gauge must be used to set proper preload. Without a dial gauge, a backyard mechanic can do well using the finger-tight method.

Your vibration could be coming from rust oir grit on the hub/rotor mating surfaces. The surface must be clean and free of grit before mating them.

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95 E320 Cabriolet, 169K