I have never seen one of these housings have a groove for the Shift Rod o-ring. I don’t think my ’54 Super Fastwin is any different than your ’53. That O-ring sould just rest on the step inside the bore for the bushing. The bushing is then seated on top to hold the O-ring between the housing and the bushing. It should be gently compressed to form a seal on the housing, busing, and shift rod. I usually lightly coat the outside of the bushing before seating it. Make sure everything is nice and clean before assembly.
-Ben