The preload thing only works if all the stuff is in good condition. You've got a "step" on the OD of the spindle, caused by the bearing being too loose, and your bearings are butting up against it when you try to set preload. With that step, it's next to impossible to get the load right.
Here's the thread from where I dealt with this same issue last summer http://www.risingsun4x4club.org/foru...hlight=spindle
and here's where I think your problem is: