Kzoo,
Here's my two cents worth...........
I had one heck of a time the first time I installed a water pump seal on my 04 550. The metal outside makes it really difficult. Wish they would have left that design alone, the old ones worked great for me. The shaft on my bike had a groove as well but don't worry about it, it will be fine.
Onward! It's good that you pulled the side cover so you can clean all the crap out of the area between the water pump seal and the oil seal for the shaft bearing in the side case.
I used the finest emery paper I could get my hands on, it doesn't even feel like an abrasive. Clean up the shaft with the paper making sure to go in the same plane as the shaft turns, not perpendicular to it.
Make sure the area where the seal goes is immaculately clean, put a very thin coat of three bond 1211 silicone on the case and the outside of the seal housing. This will prevent any leaks around the freaking metal housing.
I went a purchased a 25mm piece of aluminum round stock about 6 or 8 inches long and made sure that one end was perfectly flat. Use that end to drive the seal in. The aluminum is softer than the seal material and it wil help hold the seal, to keep it from fliping on you. I drove mine down flush with the case and let it set up for 24 hours. Make sure to back up the area of the case directly behind the seal with a piece of wood.
When you put the case back on make sure you put some electrical tape, or use the special tool that Husaberg sells to cover the circlip groove for the impeller. If you don't you will be sad. Taffy's suggestion of using vaseline sounds good, however, I just used a bit of silicone lubricant on mine. Taffy also has a good suggestion to use the Z pattern to kind of work the seal over the area of the circlip groove.
Now then, don't be surprised if the new seal leaks for awhile as the seal material is kind of hard and takes a while to seat in. Jimmy Lewis was posting here a while back with the same problem, we mentioned to let the seal break in and we haven't heard back from him so I guess it worked out.
Taffy is also right to not have your seal cold when you are trying to put the side cover back on.
One last thing........ Replace that little O ring on the shaft, it's cheap and will save you from the tree of woe.