The upper side plate screw was deleted in 1955, the screw in the trigger guard was deleted in 1961 with the 17-2.
My fathers 2003 manufactured model 617 has a recessed cylinder, so yes they are still available with recessed cylinders.
I'm not an expert, just a guy with a book, so take the following with a grain of salt. The adjustable rear sight on the 617 lacks a spring but there is a definite click as the rear screw is rotated to allow for elevation. It appears to rely on the sight bars position on the the thread of the screw to hold it steady, there is a square block on the end of the screw that engages with the frame so it doesn't move up and down when pressed on. I'm assuming the 1950's era sights worked on the same principle.
It's possible there is some irregularity in the chambers that polishing may help, I suggest you start a new thread in either the revolver or gunsmithing forums. One of the more knowledgeable members may be able to advise you. Don't mess with the gun without expert advise though.
According to the Standard Catalog of S&W, in 2006 a Postwar K22 Masterpiece, 3rd model in excellent condition was worth $600 in 2006. As you mentioned, prices have gone up on collectible Smiths since then. Of course, with the world economy tanking this may change. For the moment, for paying $400 for a near new K22, you are officially a pirate.