Your o-ring may have needed more time to dry....I noticed that mine went back down in size after a while. However, you can always move the oring down to the bottle neck instead.
But it also sounds like you may have tightened the cap on too far....it will cause the oring to buckle and therefore leak. That would be the reason you are seeing one side riding out of the "track". It just needs to be on firmly.
If this setup becomes too much of a hassle, you can try the Oring delete method. Which is moving the oring down to the bottle below the threads. Or this way works too. REO Tips & Tricks...some basic troubleshooting ideas
You con't have to do the blind squonk...not everyone is comfortable doing that. Rob doesn't even do it.