That threaded collar you point to in the picture is called a spindle collar and has nothing to do with the chuck and much to do with the spindle.
It's purpose is to support and secure the spindle in the quill and allow adjustment for thrust bearing. It should be snug to the thrust bearing but not too tight. When you tightened that collar, it squeezed the bearing to the point where it wouldn't turn.
Early 12-1/4" drill presses came in two configurations. You could get a drill press with a tapered spindle or a DP with a threaded spindle. Below left are close-up photos of the spindle collar on a threaded spindle; on the right, tapered spindle.
Above the spindle collar on a threaded spindle is a fiber washer, then the thrust bearing, then the quill. The taper spindle assembly has a slightly different sequence of parts.
It's not likely you'd be able to be able to swap the sleeve bushings with needle bearings. The ID of the bushing is 5/8". I'm not exactly sure of the OD, but it's something like 3/4"... the walls are not very thick. It is likely new bushings would help run-out. In my experience, they need to be reamed after installation.
Check this link for disassembly instructions of a 12-1/4" drill press:
http://www.garagejournal.com/forum/showthread.php?p=5658352#post5658352