Andrew Gillis has a great trick - set the wheel where you want it and then cut the screw with about 3/16" sticking out, dab of Loctite and then thread the cap on, so it's flush against the dropout.
and to answer the question posed by the OP - spring goes on the inside.
Dave Levy at TiCycles makes stainless steel hardware that duplicates the original, nice and shiny and probably stronger. Available on ebay.
Mark Petry
Bainbridge Island, WA USA