Upon further investigation it appears that pasting everything inside of the spacer ring has the potential to increase cooling performance. The air that is normally trapped inside the ring acts as an insulator. Thermal paste heat transfer is somewhere between 200 and 400 times better than air so it stands to reason that you would want to minimize the amount of air trapped by the water block. Tomorrow I will attempt to fill all air gaps and also wiggle the water block down rather than pushing it straight down. This should squeeze more of the paste out from the top of the chips while still allowing me to fill in the surrounding areas.

Fingers crossed. More updates to follow.