Saw that in the instructions but if it was left in, it'd move the end cap further out not further in, right? It also didn't look like it was in the built photos.
Is it an older model of this hub perhaps? One that's not 12spd compatible?
Is it definitely XDR (road) and not XD (mtb)?
Argh, If I could mess with it I'm sure I could work out what's going on. Could it be the cassette binding on the freehub body? How much gap can you see behind it? Is it right up against the little blocky bits?