FWIW, it could be that there should be a recessed area..... but not as worn as my spindle was. I definitely had a huge amount of slop in my spindle. I had noticed it a number of times. I just thought that I had an issue with my fine down feed mechanism. But no, I had a problem in which the spindle was actually moving up and down inside of my quill.
Since I could only go with what I had....only going with what I assumed was the issue, that’s what I did. I’ve never had a Millrite spindle apart before.
So...all back together and I ran it for a few minutes. Still need to read that break in procedure again. I forgot the details. But it doesn’t seem to be getting hot. I then installed a 1/2” collet and a 1/2” end mill. I checked the run out on the smooth shank of the end mill. I’m getting about 2 thousandths run out. Not great, but I’m okay with this for now. Since the quill was so damaged and the spindle was walking up and down in the quill housing for who knows how long, I was just happy to be able to save the spindle.
I had no reference for where to set the high spots in the new bearings in relation to the quill. So, at this stage I’m going to use it for a few months and make sure that the bearings are good to go. Once I’m happy with the bearings, I might try to regrind the R8 spindle seat. I still need to figure out how I’m going to get my grinder mounted to where I can move it in and out at the proper angle. I’ve seen a few videos of this done so I know it’s doable.