Hi EXW-
Don't worry, there's a lot of people here who can help you out. So, let's get started!
1. There does not seem to be any flat spot or hole in the outer roter shaft for attaching the lower roter head with the 4 screws. Is this just a tighten as much as you can piece? At a certain point the screws just spin but they does seem to prevent the head from moving.
Yes, just tighten them as much as you can... but be very careful not to over-tighten! If the screws are spinning in place, you are getting pretty close to stripping out the screw holes. Just screw them in until they are finger-tight, and that will hold the lower head in place just fine.
2. How do you know what height on the shaft to position the lower roter head? I positioned it so the lower swashplate was about level and there was a small gap between it and the outer shaft retaining collar.
You're probably fine here. Make sure that both of your servo horns are centered (level), and then adjust the lower rotor head up or down until the swash is also level. At this point, it helps to mark the lower shaft with a Sharpie so that you know where to reposition the lower rotor head the next time you have to take your bird apart.
3. Should the lower roter head be able to move vertically? I know this is a very basic question, but I want to make sure I do this correctly. Right now mine is tight on the shaft and cannot move vertically.
No, the lower rotor head should not be able to move vertically.
4. This is a big one. I cannot get the lower swash plate to stay flush with the upper swash plate. My first question is should it stay flush? My guess is yes, and based on the pictures I took prior to replacing the part, that was the case. After I replaced the lower roter head, everything was fine for about a day. Now, as soon as I apply a little throttle and then move the right stick, I can see the lower swash plate fall down and rest on the outer shaft retaining collar. Once this happens, I have no right stick control.
A separated swash plate is a typical CX problem. Same thing happened to my bird soon after I brought it home. The good news is that there's a simple and effective solution. What you need to do is VERY CAREFULLY glue the inner collar of the swash plate to the inner race (ring) of the swash bearing. I used a little epoxy, applied with a toothpick, and my swash hasn't come apart in over 90 flights since then. Just remember to use a tiny, thin ring of glue and be sure to wipe up any excess before it sets up. Otherwise, your swash will turn into a neat little paperweight, and you'll be making a trip to the hobby store.
I hope this helps!