Item #2 is the balancing spool. If defective, you may get improper balance, or low flow from hot or cold. It would not cause the faucet to drip. If the balancing cartridge is damaged, just pull it out and replace it.
If the spout/shower head is dripping, replace the seats and springs, item 1, and if necessary, the control stem ( next to the #1 in the picture.