Sounds like you have it right.....just had mine apart on my 1211 to free up the rusted rock shaft. As it looks in your pic, its in the "float" mode right now. Does your rock shaft move freely like this? If not its probably rusted inside like mine was, which is pretty common on these.
see if this helps...
http://ccmanuals.info/pdf/1210-1810-...s%20Manual.pdf
Jeff (teet)