Pulled the wifes rear wheel off to change the tire without paying to much attention because it was easy to take apart...BUT, which way does the axle spacer go in? I thinking the cutdown or recessed end goes in toward the wheel/bearing, however the exploded parts view shows it going out toward the swingarm?

The inner side collar (axle spacer) goes in with the large flange end facing inwards towards the bearings. Don't forget to grease the 3mm groove in the final gear shaft.

With the discussion on rear wheel play, it might be good to revisit this thread. Also there is a great pictorial in the "pictorial and maintenance" section on rear wheel removal. I hope this helps someone, it did me. I'm a believer in that pictorial section. Thanks to all who posted there.