Yes, the receiver extension must be indexed properly when reinstalled. Depending on where the notches are, that will dictate where the tail piece of the stock aligns. When I install them, I put the tail piece onto the receiver extension, then collapse it completely. I use the comb of the stock to act as a timing gauge. The comb should point to the center of the rear iron sight housing. Once it is in position, lock the nut down. Both the locknut and the receiver extension should be secured with locktite.
You do not want to screw the receiver extension in too far either. You want the receiver extension to be flush with the inside of the receiver. If you thread the extension too far into the receiver, it will not allow you to screw on the pistol grip portion of the stock since it uses the external threads of the receiver extension to engage.
Pushing button is needed to adjust the stock. Without pushing it, you will meet a lot of resistance. You should press the button with your right hand thumb with your hand over the top of the stock body. Observe the witness lines engraved in the receiver extension. These will give you a visual reference point to where the engagement notch is.