That piece is the seal that prevents the juice from getting into the mouth piece. It does go over the top of the metal tube, not on the inside. However, there are 2 sets of wicks, one above the other, and the cap has a set of slots that needs to line up with the top set of wicks in order for it to be able to be pushed down far enough.
Drain and disassemble the iClear. once you remove the top cap and tank from the base, you will be able to see everything. Line up the slots in the cap with the top wicks and push it on there. When you re-assemble the tank, be sure not to fill it up past the "full" line, which is at the bottom of the cap. If you do, it might flood again.
You may need to burn through any excess liquid that made it into the coil assembly.