yes the o'ring stops the collar from loosening during a race and therefor moving unwatedly.
Did you put some oil on the threads before you started to put the colar on? This adds lubrication to the shock body, making it easie to put them on and gives you less chance of cross threading the whole thing.
Hopefully you haven't already cross threaded them
and thats preventing you from screwing the the collars up.
Mine went on fine with the oil on, but are a little tight without it, but not imposible to screw up or down.
check for cross threading. hopefully its ok.