I was able to find a lightly used TT-02RR and I got a diff locking block for the front diff Part #54649, but the diff locking block is too wide to fit the ring gear on. What am I doing wrong?

May sound silly, but did you remove the plastic bevel gear at the bottom of the larger half of the diff housing?

Yes, I removed the o-ring too. What’s weird is that even if the block fit in place, the outdrive axle won’t even fit in into the locking block. I’m thinking I probably need a different diff housing, outdrives and pins.

Also, the TT02RR diffs only use 2 small bevel gears rather than the 4 that show in your diagram.

Diff lock is not in the rules this year. Only the shocks and carbon towers.

If I remember correctly the diff locker doesn't fit in the diff housing that can hold fluid. You have to use a plain tt02 housing.
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I have both the TT-01 and TT-02 stock diffs each with a diff locker installed. They are a drop fit and easily fit without any difficulties or issues.

The TT02RR comes with oil filled diffs so I need to get the TT02 stock diff housing and outdrives.

I believe the oil filled diffs are different, which explains things.

Type SR just popped up on eBay

Tamiya 1/10 TT02 SR 4 Wheel Drive Touring Car Chasis

You need to use the original TT02 diff case .. not the RR oil diff case.. The RR diff case is different

Is there a An upgrade kit for suspension for standard tt02? To 420arms ect

The 420 arms would drop right in. The only issue is if you use the droop screws / down stops. The 418 to 420 do not have drop screws m both sides as the type S arms. So you would have to drill those in yourself

Is TT02 always has one length of center shaft? The one I got as upgrade is 14cm end to end, but one my friend said he bought one is 12.5cm, I'm working on project that will use this shaft, 14cm is too long.

Should be one length. Just make sure you’re using the Tamiya one as reference and not an after market one