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I too have a Dillon so I will speak in generalities. Because of the small mouth of the .223 you need to trim to a uniform length. If the powder funnel is set for a long case, a short case will spill powder. If the funnel is set for a short case, a long case will be damaged (like you describe).
In general IMR/stick powders are a bad idea for the .223 in a progressive press. If you use a trickler and/or weight each charge, they are fine. The powder delivery system of a progressive press funnelling into the narrow neck of a .223 funnel wreaks havock with the larger kernals. Bridging and cutting of kernals is fairly common.
In a nutshell - trim to uniform length and use a ball powder like W-296, BLC-2 H-335.
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