Not sure the situation with the flat washer, could you get a picture of it. I know that there is one that goes at the end where the circlip is (I think that is right). Also if not mistaken the kit has a second seal with it that is the item that is supposed to help keep the oil from seeping to electrical.
I have the kit in my garage and will look later. I have not had my starter taken apart, but bought the kit in case I need to later. Since my original starter got replaced due to leaking oil from the winding, I have had no issues with it in over 2 years and close to 20k.
BTW how much was your kit, mine was just short of $10.00 and that was with the Electra Klean.