That spindle appears to have been extremely hot from the picture, unless that's a shadow. If it has been hot enough to turn blue, I would not trust it at highway speeds.
But if you want to use it, start with some new bearings and races. Try the bearings on the spindle. They should slip fit with minimal up and down play. Usually a spindle will wear on the bottom when a bearing spins. If the underside is worn, another strike against it.
The races must be a press fit inside the hubs. If the race is loose, the hub must be replaced.
Dimpling with a punch is not going to be a long term fix.
As for setting the preload, I snug the nut down while turning the rotor. This is just to seat everything. Then back off, and tighten just enough to take out the slack and get the cotter pin in the first available notch without having to back off.
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Today's Featured Article - Harvestin Hay: The Early Years (Part 2) - by Pat Browning. The summer of 1950 was the start of a new era in farming for our family. I was thirteen, and Kathy (my oldest sister) was seven. At this age, I believed tractor farming was the only way, hot stuff -- and given a chance I probably would have used the tractor, Dad's first, a 1936 Model "A" John Deere, to go bring in the cows! And I think Dad was ready for some automation too. And so it was that we acquired a good, used J. I. Case, wire tie hay baler. In addition to a person to drive th
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