Leave the big rubber ring off until you get the endplay ready.
But DON'T forget it when you actually install the pump.:D
Don't sweat the bushing depth too much, but I always put them just a hair below flush with the inner edge (next to the pump gears)
The pump gears are what puts a side load on that bushing so it always made sense to me to put the bushing closest to them.
Never had a problem with those types of bushings, but as mentioned "softer hub metals" sure could wear faster.