Front fork compression adjustment issue

So I took apart both of my front stanchions this weekend. It took a while but I got the seals changed (which were leaking), replaced the old oil and got them buttoned back up. Upon inspection today, my stanchion which handles rebound is working great. I can test it off of the bike and see that when I use the adjustment screw, it very obviously changes the rebound rate. However, the same can not be said for my compression side.

When I tested my compression stanchion, it didn't adjust at all when using the adjustment screw. When using it next to my rebound fork, it seemed as if it was stuck on full soft. When putting the fork together, I set the top cap lock nut at 12 mm from the top of the damping mechanism. I also ensured that the damper rod adjustment screw was set in 13 mm from flush on the bottom of the top cap. However, when I go to put my top cap on, a few millimeters from hitting the lock nut, it won't go on any more. Even gripping the damping mechanism and using a wrench to try and get the top cap to go on will not allow it to reach the lock nut stationed at 12mm.

I'm pretty sure that for whatever reason, my compression stanchion is at full soft and stuck there. What are things that I can check for when putting this together? My damper rod and damping mechanism don't seem to be damaged at all. The damping rod (thin rod inside of the damping mechanism) does feel not extremely well lubricated, though. It feels like during it's first 0.5 mm of travel it takes a little bit more effort than it probably should when it's sticking out of the damper . If you're willing to help, and can't visualize the issue, let me know and I'll try to grab pictures and post the proper visuals from the service manual.
 
What weight oil did you put in? Did you set the proper level of oil without the spring installed and with the rod fully extended? Before setting the oil level, did you work the rod slowly until you could feel the dampening working and no more air bubbles came up? After working the rod, did you let the fork stand for 10 to 15 minutes to let all air rise? Your 12 and 13mm measurements are correct so it should have been able to screw all the way on and adjust. I can only imagine trapped air and/or incorrect fluid level but something is preventing the dampening rod from seating in the bottom of the damper thus too much of the rod is showing and you cannot get the cap to set. Can you snap a pic of the top of the dampening assembly with the rod in place?
 
What weight oil did you put in? Did you set the proper level of oil without the spring installed and with the rod fully extended? Before setting the oil level, did you work the rod slowly until you could feel the dampening working and no more air bubbles came up? After working the rod, did you let the fork stand for 10 to 15 minutes to let all air rise? Your 12 and 13mm measurements are correct so it should have been able to screw all the way on and adjust. I can only imagine trapped air and/or incorrect fluid level but something is preventing the dampening rod from seating in the bottom of the damper thus too much of the rod is showing and you cannot get the cap to set. Can you snap a pic of the top of the dampening assembly with the rod in place?

I put in some 7w oil.

The oil level was set to the FSM specs with the damper rod fully extended (pulled up) and no spring installed. I wouldn't have been able to use my syringe if the spring was installed.

I worked the rod many times and waited the allotted time before checking the fluid level. It definitely works in that it gives me a good amount of resistance when compressing, and low resistance when it returns.

I know other people have adjusted their fluid level lower in an attempt to adjust how much their fork assembly will move. I'll snap a picture and possibly take a video and post back here when I get a chance.
 
Sounds like you're spot-on with the assembly. Did you do these two forks completely separate? You did not accidentally cross over some parts, right? Sorry, I have to ask. ;) These are not interchangeable which you probably know but to help you out, we want to be certain. ;)
 
Sounds like you're spot-on with the assembly. Did you do these two forks completely separate? You did not accidentally cross over some parts, right? Sorry, I have to ask. ;) These are not interchangeable which you probably know but to help you out, we want to be certain. ;)

Both stanchions were done individually. The compression stanchion (the one that's not working for me) was the second one I did. The rebound stanchion is working great.
 
After taking the attached pictures, I think I can narrow down my issue a bit more.

The rod extends 5.68 mm from the top of the damping assembly. When I compress, that rod, I can get it to extend only 1.98 mm from the top of the assembly.

When the top cap adjusting bolt is at full soft, it is 16.59 mm deep. When I have it extended out roughly 24 clicks from full soft, it is 13.56 mm deep.

Doing a little math, since we know the jam nut is 12 mm from the end of the damping assembly, we can see that my adjuster is actually working correctly. The minimum length that my rod and damping assembly can operate with is 13.98 mm, which is more than the minimum of 13.56 mm that the adjusting bolt can supply. This is also why when I have the entire assembly set up, I can only go about 20 clicks before hitting "full stiff". Also, the maximum length of the rod is 17.68 mm, which is more than the 16.59 mm that the adjusting bolt can allow. This means that my adjustment bolt is working correctly for the most part. The only thing that's slightly off is if I set the adjustment bolt to 13 mm as the FSM says when reinstalling, there is no way I can compress the damping rod that far since I could only compress it to a minimum length of 13.98 mm. Does that possibly indicate something is wrong?

To test another theory, I removed the top cap and pushed down and pulled back the damping assembly. It gave me a certain amount of resistance when compressing it. I then pushed down on the damping rod while doing the same thing. It was the same resistance. I'm now convinced that there is something wrong with my damping assembly. Is there any way I could have damaged some type of orifice? Could having air in the system or something like that cause this to happen? Even if I slightly under or overfilled, the rod should adjust the resistance under compression and the rod should rest at the correct spot. At this point I'm thinking that somehow this assembly is damaged. Any other insight or ideas would be extremely helpful.
 
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Also, how perceptible should the change in compression be? My rebound adjustment is night and day. On this, I truly can't tell a difference. I'm assuming that I really should be able to tell a night and day difference like my rebound adjustment.
 
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