Pretty sure the nut is not the correct type if it's all the way down and the knob is still sitting so high up.
You need a "jam nut" - it is half the height of a regular nut:
https://www.belmetric.com/zinc-plain...dkccef7dhn44u1
If that's the nut you have, then there may be something wrong with the threads in your shift knob, it may need to be re-tapped / chased to clean it out.