I had the same problem with the recoil lug. I just took a file and opened the slot a little.
I also have had the same problem with the bolt head. I used my dremel to remove bump from the inside of the bolt body. Then it doesn't matter if your bolthead has the cutout or not. You'll just run the chance of installing the bolthead upside down. No biggie.
You have a short action. A long action magazine won't fit, no matter what. You'll need a 308 sized magazine and follower. It looks like your loaded round would fit that 223 magazine if the spacer was removed. That's the same size as the 308 magazine.
So, you're not really screwed. You just need a few minutes of work and a cheap mag and follower.
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