If you sand the chamber down to remove the pits you will create an oversize chamber and that could potentially create very hazardous problems.

Once it is pitted it's pitted. You may want to simply replace the barrel or at least try one that is in good condition to see if that cures your problem. I bet it will.

As far as the rings go the large ring goes flat side to the action sleeve, the smaller ring fits into the large ring (you will see how they fit together) and then the o-ring will fit on the mag tube in its little recess and be covered by the gas shroud on the barrel.

Go to the link and to page 14. You will see an illustration of the gas piston ring orientation.

http://www.remingtonle.com/pdf/om_11001187.pdf.