Hi Greg,
Dave Owen retro fitted the ringed side canister muffler years ago on my PAW 19 and he had to machine the lowest fin off the cooling jacket but it had (in his words) "a drunken thread" - another way of saying that when gripped in a lathe the external diameter was not on the same axis as the internal diameter and so the seating area was in fact perpendicular to the exterior and not the critical interior.
It would not clamp down with even pressure around the entire circumference, but it seems to work well enough.
Perhaps you cooling jacket is similarly not seating down evenly.
Could you perhaps use a small square inside of the bore and back along the seat to verify this?