Picture number 7 on installation instructions is discussing washer/spacer placement for fitting IDS to wheel not installing wheel to bike which might be causing confusion.
I went to a Harley dealer the other day and they were of no help and apparently have never installed the IDS on a 07 Tourer before. I'm ready to try it again but I think I know where I went wrong. I misspoke when I said the instructions states to install the new outer thin spacer on the rotor side. I just says "install the outer (thin)spacer when installing the wheel assembly. The diagram shows it between the sprocket assembly and the swing arm I believe in place of the stock larger spacer that used to go on the sprocket side. This makes sense now because I didn't have enough space to install the stock larger outer spacer. I'll keep you posted
Yep, that's what it was. On 07 models, you don't use the stock larger outer external spacer but use the supplied thin spacer between the new sprocket and swing arm. You do use the stock smaller spacer on the rotor side. Everything is nice and tight with no rubbing. I can now get the rear wheel off and new one back on in less than a 1/2 hour now.