I'm assuming that peg is the bleeder screw. Just open it counter clockwise. Some water will come out. That's supposed to happen. Keep turning the screw slowly til the sprinklers come on. When you shut it off don't over tighten it. Just turn the screw until it stops. It may take a few seconds for the valve to shut off. Not sure which valve you have.
www.sprinklerwarehouse.com/Rain-Bird-Valves-s/418.htm
As far as the leak goes. It's either the diaphragm or the valve seat. Possibly the solenoid isn't tight. Don't over tighten.
Just pay attention when you take the valve apart. You'll need to know where those parts go when you re-assemble.
Look for pits or debris in the diaphragm. It only takes one pit or grain of sand. Look for a crack in the seat. The crack can be very small and hard to see.
Good luck!