[Boostmaniac]

Yeah, #2 is correct, the other way can cause rubbing in some oddball situations and possibly lead to shock body failure.

On the ride height, I am looking at my rear right now and it seems to be sitting 1 - 2 inches higher than mine. Did you remove any weight from the back? Is it on a level surface?

Drive it around and see if the suspension loosens up a little bit and take another pic.

Good choice on struts by the way, I used those in my CRX when I was auto-xing and they performed well.

Edit: I think I also spot a loose ground wire in the second pic, you may want to get that bolted up somewhere. I remember reading somewhere that improper grounding on the rear of the vehicle can cause a slight electric charge to build and will accelerate the rust in the back. I'll see if I can verify that somewhere, but in the meantime, it never hurts to have all the grounds bolted up.