The disc on the top of the machine is only to be used for winding bobbins. So take the thread out of there.
I think I remember the thread goes from the spool to the tension, or there is a little thread guide at the back of the machine even with the tension assembly. Remember to make sure the pressure foot is up for threading.
Stitch should be better. I think you may have the tension a bit loose. Should be around 4-5.
If you go to the ISMAC website you should be able to to find a threading diagram.
Good luck.