If you want the short version - I am done! Shock is on and probably correctly just as you all had said.
Long version:
My excuse is that I've been working around the clock on a project at work and have been too busy to spend a lot of time working on it, but the reality is that when I got a break I kept going back to this problem trying to figure it out. I even called my mechanic to schedule my tire change and have him put it on right but he said they were booked up for 2 weeks. Ouch. So I kept at it. I loosened it all up and put the spacer on and fought it over and over but the spacer wouldn't go in the mount. Tonight I finally took it completely out and started over. I still could not get the spacer to fit in the larger of the two mount holes.
What you all were saying make sense because that's the only place it could go, and without it, the bolt could move on that side (and did). I just could not get it even close to fitting. I watched videos and looked at parts diagrams and it seems like it has to go there. There is a youtube video of a racing team in Singapore installing a shock in an FJR and you can see the spacer briefly in it. They cheated by having the whole seat assembly off. I decided that was more than I would tackle and it wouldn't really change anything. I couldn't get it in there and didn't think it would fit. I was convinced I had found a different part or something.
The only way I was able to believe it would fit was with my calipers. I couldn't get them into that hole because of the angle but I could measure the bottom hole on the old shock at 65 mm. The size of the bushing/spacer is 70 mm. I took the short bolt that fits in that hole and tested the snugness and there is no movement. I put the same bolt in the top mount hole and expected the same, but it wiggled. I figured the wiggle was probably at least 5 mm so that proved to me it could fit.
With that confidence, I put it on the bolt without the shock and hammered the dang thing. Magically it went right in. It is pretty tight and wouldn't have went in without the hammer. But it's in. And with all the practice, I was able to get it all lined up pretty quick and got everything back together. I took a quick ride around the block in the dark and this time no weird jerking from that bolt moving. I can't report yet on how much difference it will really make but that's not the point of the thread. The point is that the missing part IS the collar which is #6 on the parts diagrams and it hold the bolt in place for the shock as everyone here has posted.
I am so impressed that I finally got the collar to go in that hole that I now understand the term "shock and awe".
Thanks for the assist, guys.