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 - Reflections of the Fifties - by "Country" Elliott. I remember rowing up in the 1950�s in a small, rural town in northwestern New Jersey. The closest town to ours was only 3 miles away, and there were seven dairy farms in the areas of these two country towns. We had 5 acres, and because my Dad was a salesman and not a dairy farmer, he let the Bockovens, who owned the Willow Tree Dairy farm most of our land.
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