In order to release the tension assembly, you have to find the set screw. Looking at the machine straight on, the set screw is just behind the tension assembly thread guide in the side of the machine head.
The tension assembly should pull out. It may take some twisting if the machine is dirty and old.
To release the knurled knob, push in on the numbered dial until the little pin in the knob is released. Then you can turn the knob free and all the way off of the tension stud. (For more detail of this process go here : http://mysewingmachineobsession.blogspot.com/2012/01/301-tension-assembly.html Remove each part.
The tension discs on this assembly were scarred. I buffed the rough spots out with my honing stick. They aren't cosmetically perfect but they are nice and smooth.
Put the numbered dial back on and push in as you screw the knob back on. When you have the knob where you want it, let the numbered dial pop back out. It was hard on this tension, the numbered dial is rather chewed up.
In this photo, the pieces are all assembled in the correct order. The numbered dial has not been compressed against the screw. I couldn't do that AND take the photo.