The adjuster cap sliding shaft has an O-ring but that area is subject to severe corrosion. I spent some serious time and effort cleaning up the adjuster restoring it to smooth action on several sets of forks.
You can (should) disassemble the adjuster by driving out the pin that acts as a stop against the ramps in the cap.
Keep in mind any work on the stock forks is bandaiding a crude, marginally effective system.
If you are hotrodding and after "modern suspension action", 70's 80's low budget tech is poor starting place. Sez the guy who's ridden a lot of miles on modded XS fork internals, including the minton mods on madness, and resto that had the mike's cartridge emulators.
Chief problem with all these is the lack of adjustability. The fork action you want cruising a smooth road in cool weather is quite a bit different than when trying to keep up with Chaves in the Ozarks at 85F!