Remove the coilovers and put a floor jack under the pumpkin. Raise and lower the diff through the entire range of motion with an angle finder on the pinion. Find out if the pinion is changing angles appreciably through the range and also if the bars are moving nicely with no binding through the entire range of motion. At ride height and rest, the pinion needs to be parallel with the trans output shaft. It doesn't necessarily need to point at the output shaft, just be PARALLEL with it so that the u-joints will be properly phased with the negative and positive angles cancelling each other out. In other words, you wouldn't want the output shaft at a negative 3* and the pinion at negative something. If the trans shaft is negative 3*, then the pinion should be at positive 3* or somewhere close within 1*.

It has been my experience that angling the bottom bar up somewhat will help to plant the rear tires on acceleration. Draw a vertical line through the middle of the front tire and then draw a horizontal line at the center of gravity (about the same height as the camshaft in the motor) and make a "T" above the front tire, then draw a line through the "T" and intersect with the tire patch of the rear tire. The angle of that line would be the perfect angle for the bottom bar.

It doesn't matter if the coilovers are vertical or not. Depending on the angle, you will just need a stiffer spring on the shock to make up the difference. The more angle on the coilover, the less effective the spring on it will be because you will be using less of the spring (not compressing it all the way as you would if the coilover was installed vertically).

It looks like your shock is fully extended. Do not install the coilover that way. Remove the spring and compress the shock to 55% in plunge and 45% in rebound. That will be the installed height of the coilover.