Yes that is your seal(yellow part) and yes it's shot with that big nick in it, to remove I can alot of time do it with fingers after warming it(but I do have strong hands), you can use a flat tip screw driver(thin face) and carefully pry it up an off the "button"(don't mar anything), for the other 0-rings might as well replace then while you havdfse the gun apart, alot of place's to get them?