these instuctions are misleading, I dont want to do anything wrong here..

Is the grooved ring the 2nd ring?

If so its saying the groove should face up towards the cylinder head? Is this true?

you should have two compression rings and they should have a small indention on each ring. the indentions should face up. the wavey ring and two really think rings are the oil rings those go on the very bottom groove of the piston.