One possibility for the groove and clip riding low is that the washers in the bearing set were reversed. They have the same OD but their IDs are different, with the top one slightly larger, allowing it to sit in the part that it mates to. When it doesn’t sit in there, the whole stack is raised by the thickness of that top washer.
Of course this won’t make it any easier to remove that clip. I did exactly what Gadget described, down to the cursing. It takes two tools opposing one another; if you can widen that gap then it’ll come out of its groove.
Good luck…. and be forewarned. The next thing that happens after the clip comes out is the ball bearings take flight.