sorry let me clarify.
It's not water in side of the dial (where the hand and PSI numbers are written).
It's water inside the SPG port, or innards of the SPG(?)
Here is the order of events:
1. I took apart the HP hose and SPG. Really loose connection, a wee bit tighter than hand tight.
2. the spool is stuck inside the SPG, unable to be taken out easily as I would've expected.
3. need to use plier to take the spool out.
4. the SPG side spool oring was stuck inside the spg during the process of 3)
5. took the spool oring out. the two spool orings appear to be intact.
6. spool oring was wet, water can be seen inside the SPG port. water can be swung out our the port.
I'll reply to each of your points:
1. This is not unusual, as long as the SPG doesn't actually spin off, it's fine. The only seals are the 2 spool o-rings.
2-3. Also not unusual, but typically on a brand new one you can just pull it out with your fingers.
4. This is the problem, it indicates that the inward spool o-ring was not installed correctly on the spool. But if that o-ring was not in place, there should have been a very noticeable air leak. Lots of bubbles.
5-6. It's normal for there to water on the exterior of the spool between the o-rings, and on the threads. There's usually no o-ring sealing those.
The issue is that if there is a leak that could allow water in to the SPG, that same leak would let air out when it's under pressure, and considering it's full tank pressure, I'm sure you can understand the amount of tiny bubbles we are talking about. Nobody paying even the slightest bit of attention would miss that.
I assume the SPG was working, correct? IE, during the dive it showed tank pressure gradually decreasing throughout the dive? If that was the case, and there was no loud air leak, then the only possibility is that water got in when you rinsed your reg. The only way I can imagine that happening, that sort of jibes with your description, is that the inner o-ring was not installed on the spool, but instead pushed into the SPG. Then when the reg was pressurized it somehow sealed air against the end of the spool, i.e. the air pressure pushed it into place in such a way that it sealed under pressure, but relaxed enough when the pressure was released to allow water into the SPG during a rinse.
I have to say that this explanation is just a wild guess and is probably a long shot. And considering you only had your reg in the rinse tank for a few moments, even if it were true (which I kind of doubt) then there shouldn't have been much water. How much came out, a few drops?
I would try to blow some dry air into the SPG, maybe using a can of compressed air and one of those plastic straws. See how much actually comes out. I bet you can dry it out and it will work fine.