Rick,
It doesn't look like the spacer serves any purpose. Can you even get the cotter pin back in with it like that?
BTW, I ended up getting the OME shocks from Indy. I've been very happy with them. They are not adjustable but are set up for a nice mix of on/off road use. They are about the same price as Rancho's so it's really just a choice of whether you want the adjustable feature or not. I decided that I'd never change them once set so the adjustable feature would be lost on me. The OME are progressive so they are kinda light on the smaller bumps and get stiffer on the larger.
Tom