There are bushings on both ends that catch on each other and some clips to hold them and the seals in place. You will knock one out as you pull the legs apart. Search for some instructional videos on youtube and it will make sense. The damper rod only attaches at the base of the lower leg and at the fork cap. So you can just leave it in the lower leg. There is another tool called a fork bleeder that screws on to the damper rod where the cap did. You don't absolutely need it, but it gives you a convenient place to hold on to the rod and you don't have to fish it out from in the tube when it collapses all the way.
Yes, back off the rebound screw before loosening the locknut on the fork cap. When reassembling you need to set it at the stiffest damping position (something like 20 or 22 clicks in) and thread the cap on by hand just until it seats. This has the adjuster pushing the adjuster rod all the way down and is the location you want the cap to sit at. Back off the adjuster at this point a bit to avoid forcing the adjuster rod further when you tighten the lock nut. Then check that you have the right number of clicks in your range and you can set it back to where you want it.
