Had some free time to look into it today and figured it out. There was a hidden set screw on the needle position gear. Once you remove that, the knob pulls out. Then the bushing and the rest of the stitch length selector dial can be removed.
What causes the bushing to spin is from oil. The bushing is press fit into the housing and should not be lubricated but if it's oiled then oil will work its way in between the housing and bushing, causing the bushing to spin, which causes the white dot/square to move.
I've been reading that the fix is to drill into the housing and install a set screw to permanently hold the bushing in place. I didn't want metal shavings falling down inside near the motor so I just ended up using Red Loctite on the outside of the bushing which is just as good of a fix IMO. Just make sure to remove any oil residue on the bushing and housing with acetone or isopropyl alcohol before applying it. Once cured, it aint coming off unless you stick a torch to it. Make sure the notch at the end of the bushing is perfectly vertical before you press/tap it in because it bonds quickly. I messed up the first time and had to really crank on it with vice grips to remove it.
This was a fairly easy fix. I was expecting to take the entire machine apart based on the several people mentioning that this was a "huge job" but it took me maybe 30 minutes. And this fix will also work hook bushings that seizes onto the shaft and spins inside the housings.