You do need that snap ring. It retains the axle and keeps the back side of the wheel bearing sealed. It does not however stay in that inner groove when you switch to manual hubs. For the auto hubs, the snap ring goes in the inner groove, capturing the inner workings of the hub (the cup, the coppery looking deal, and the splined washer in front of that). If you're running manual hubs, the snap ring goes in the outer groove, capturing a larger part of the mechanism (the whole body on aftermarket hubs, or just the drive clutch on the factory style).
If you're trying to fit the manual hub with the snap ring still sitting in the inner groove, that's probably what's stopping you. Remove the snap ring, remove the dial assembly from the hub, install the hub, install the snap ring, make sure it's actually snapped in and not just sitting next to its groove (might need to reach around and pull the axle towards you while you push the snap ring home), and then reinstall the dial. Check the torque on the hub bolts after driving it for a bit, especially if the hub has a paper gasket, as those tend to compress after a bit.
The service manual wants you to check endplay on the CV after installing the snap ring. Should be 0.1-0.3mm (4-12 thou). If it's wrong, you can replace the snap ring with one of a different thickness to dial it in. The manual also wants you to replace the snap ring each time you take it off. I didn't do either of those things, and I don't think many people do, but, yeah, there is a spec for that. I assume it keeps the seal at the back of the hub tight enough to do its job but not so tight that it burns up.
WD21s aren't usually powerful enough to hurt themselves (at least not the drivetrain), but from what I've read, it is usually a hub that lets go if anything does. I've seen one picture of a broken CV shaft (wasn't even the joint that failed, the shaft itself snapped off), but that was on a heavily-wheeled truck with a hotrod VG34 and the factory manual hubs, which are supposed to be the strongest you can get for these. I doubt you will have that problem with Ali Express hubs and what I'm guessing is a TD27 or a carb'd four-pot.