Yea, looking at your pictures and reading your description, I have to agree that doesn't look right, the O-ring looks like it would get pushed past the locking ring as you push the CV shaft over the splines.
I'm assuming the O-ring is there to keep grease between the splines from oozing out and slinging as it spins.
Look inside the CV Joint case, that should fit over those splines, is there a groove for the O-ring to fit inside? Remember there should be a groove for the snap/lock ring to expand into and lock the CV joint onto the shaft, if there is an additional groove, perhaps the O-ring is suppose to be inserted in that groove before joining the two pieces together.
On the shaft in the photo, there seems to be a groove at the end of the splines, that might be simply left over from machining, but it does seem like a place for the o-ring to end up and seat.
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