Does any body Know what the groove in the cap jewel is designed to do?

Melvin, The "Incabloc" jewel set you pictured has a groove that I think assures correct assembly clearance to avoid problems with any latent burr on the sharp edge of the bearing assembly cup.
In general, there IS a reason for the various grooves we see on these jewels. I attach a scan of p 249 of Louis & Samuel Levin's "Practical Benchwork for Horologists" which illustrates the desired capillary "well" provided by the pivot/endcap jewel set. The presence of an annular groove or grooves around the periphery of these "paired" jewels helps encourage the capillary seal to remain where the oil is needed rather than spreading which could cause the bearing to dry out, and/or the oil to get where it does not belong.

David and Melvin,
A great lesson, and with visual aids!

Thank you
Ed

Great Job David.
I should give credit to the elgin watch post for their great picture of the incabloc jewel set.