Lifeisabeach - about the markings, I roughly aligned the marks. I figured the purpose of the mark on the ball joint was to ensure that the indented portion of the ball joint shaft faces in towards the engine (so that the securing bolt on the steering knuckle can fit in). Given that the ball joint is relatively free to rotate, those marks don't have to be lined up perfectly - did I miss something?

B.Reilly - that's what I'm thinking I'll try tonight. I'm also going to see if there is any more gunk on the top of the female part of the connection in the steering knuckle, to see if something there is preventing the ball joint shaft from going all the way up.

LandYacht - The groove you mention is exactly the issue here, but don't worry, I don't have the bolt in when I'm trying to get the ball joint shaft (with groove) in place - I'm only adding the bolt after it is in place.