I think that I figured out where the o-ring goes. Hopes this will help someone like me later.
So the o-ring goes over the barrel in front of the support ring after the support ring is installed. The reason why I say this is I notice that the factory used something like lock-tite to hold the support ring in place and this is the only place with the red lock-tite. I found traces of the red loc-tite on the o-ring.
so I assembled the unit this way and the gun works great.