That spacer looks like its also needed because the seal ring is nearer the tip of the distributor than a Bosch. Push it down too far and maybe oil comes out the top from the splash lubrication hole in the side of the drive shaft bore, and maybe it begins to starve the driveshaft/drive pinion of a dribble of oil coming down the side. As that advert says, it needs the spacer ring to cover up the fact its a badly fitting aftermarket part without the spacer.
The o-ring is in the right place. You can't push it in too far, there's a drive shaft down there you know. It doesn't have a splash lubrication hole, it has sealed bearings. It's not a badly fitting aftermarket part, it's like it is because fits Volvos out of the box and VWs with the spacer (or common sense).
I found the outer ring of a bottom bracket bearing has an inside diameter of 27mm and is 7mm wide it’s not very thick but I think it will do the job if needed
What job? Have you tried taking your 123 to bits? the ball races should just be pressed in and replaceable, if that's what's seized up.
It's what the main crank bearing is called on a bicycle - where the pedal crank turns in the frame, that short fat tube is the bottom bracket.
Ive tried on mine but the siezed bearing has got a good grip.. waiting to get to a workbench and vice somewhere and give it a good beating