I think I see your problem with the o-ring. Am I seeing it correctly that you have the cup facing the sensor? On mine the cup faces the transmission and actually compresses the o-ring and the cup winds up pressing against the transmission. The other way around I can see how the center of the cup would cut into the o ring. That's how the cup was on the sensor in mine and I don't think it was ever apart as it is a lot mileage car that was parked for years but I could be mistaken. Hope this helps.
