The O-ring will be installed around the outside of the extractor spring before the extractor is re-installed back in the bolt.

In regards to the condition of the chamber, if you can see Grooved rings in the chamber, the barrel needs to be sent back.  Also, if you are not completely flushing out any Copper bore solvent from the chamber/bore after cleaning, the solvent tends to get a bit sticky when hot/powder fouling, and could be the problem all in it's self.