Man this is deep. I am by no means a headset expert. But on my FM208, I loosen the stem bolts on the fork tube, then squeeze the fork and stem together with a long c-clamp (and wood block on the stem). That takes out all the vertical slack. Then I tighten the stem bolts. That has seemed to take out all the vertical slack. I admittedly did not put the bike together but I have taken the stem off a few times.
