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The loop is the right way. You can't fix those batteries in place rigidly enough to use a non flexible coupler, and even if you could you would have to use an omega shaped bar to account for thermal expansion. The larger hole is not a big problem, you loose some contact area but that's only important if you draw big amps. Put a wide washer of the right size under the nut to spread the load, and I like to use locknuts for this.
Isn't the purpose of the lock washer to keep upwards pressure on the nut? I don't see how that is not effective.I would not use lockwashers, you need a flat washer over the lug and that makes all lock washers useless. But you can double nut, that's also secure.
For all I know there is no standard for the series connection colour, red is just fine.
AFAIK their is no official designator, however, on one one job where I installed 12 8volt batteries to make 3 banks of 32volts, I used red and yellow on opposite ends of the inter-connecting cables.For the series connection (the loop), is there an appropriate color?