yes you can lose the collar if you turn the extension upside down. So just do like me and keep it upright or tight the rope around it when you stock it.

The main purpose of that O-ring is actually to avoid the contact between the carbon of the mast and the alloy of the collar. Carbon and alloy in salt water are not a good mix and the collar get corroded faster.
I personally don't bother about that o-ring but I had to remake a new alloy collar as mine just broke because of the corosion (it was quite old though).