Can I mount the NG-1 pickup upside down so that it sits totally flush with the bridge? What's the purpose of the little black sponge next to electronics block? Is this something that may affect the performance of the pickup?

In general, you can install NG-1 with the jack facing down, as long as you have enough clearance between the tie bar and the side wing of the bridge. Some bridges can accommodate the head and others are a little too short pushing the head and causing the pickup to bend.  You will need approximate clearance of 7.5mm to accommodate the jack head.

The black sponge also helps to seal the interior of the electronic block, as well as providing a little bit of a wall so that the top cap doesn’t overhang and provide an edge for anything to catch on.

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