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This is an interesting topic. I usually use the OMC tool, so the shift rod is not in place. But, there surely is a good argument for having the shift rod installed first through the oring to make sure it is oriented properly The next question is a great one as well. How far do you tap the bushing in. There is no spacer to bottom out on, in most cases, and driving the bushing in too far will probably distort the oring and lead to leakage. I usually try to make a note of how far the bushing was tapped in before removing it, and try to reset it to that position.
Some newer models have a bushing that encapsulates the oring and bottoms on that plastic spacer, this takes the guess work out of the equation for sure…
Once I have driven in the new oring and bushing, I usually take a grease gun to fill that cavity with grease before installing the shift rod…
The grease is a good idea. Thanks