The grease cup needs to be filled completely, so there's a solid stack of lube from the cap to the shaft. Turning the cap a fraction of a turn pushes a bit of grease around the spring and past the disc to give the shaft a little lubrication.

Where is the O ring you're referring to? The groove in the distributor housing definitely does not need a ring- - - -it's only there to keep splashed oil from the crankcase from migrating up the housing and leaking to the outside.
Jerry

"It is better to be silent and be thought a fool than to speak and eliminate all doubt!" - Abraham Lincoln
Cringe and wail in fear, Eloi- - - - -we Morlocks are on the hunt!
There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self. - Ernest Hemingway
Love your enemies and drive 'em nuts!