Bicycle Mechanics - 38T freewheel install

I got everything installed and the rear derailleur easily goes up tp 38t in fact I could overshoot it if I put the limit screw out too far. I am attaching several pictures so you can see the setup from the small cog, middle cog (it's a 5 speed freewheel) and large cog. It is a little rough sounding. I am not sure if I have the angle screw correct and also mainly where the derailleur attaches to the hanger I can change quite a but with the allen bolt that hooks the rear derailleur to the hanger I am just guessing how to set that. If you can tell from the pictures please let me know if you think I have it hooked on correctly. Thanks for all your help. I also sent one picture of the finished bike. Someone gave it to me and I put on new BB, freewheel,crankset, F & R derailleurs, racks, and fenders. My dog goes in front basket. We went up our 12% hill with it today and it did well.

The claw adapter for your derailer should be inside the dropout. There is a plate that holds the claw in place inside the dropout. This will put your B-screw in the right location and you will get more chain wrap on the large cog.

Check your chain length by shifting into your small/small combo. The chain shouldn't touch the jockey pulley.

I can't give you any advice on the derailleur, but the dog looks happy. Is that a Yorkie?

The claw adapter for your derailer should be inside the dropout. There is a plate that holds the claw in place inside the dropout. This will put your B-screw in the right location and you will get more chain wrap on the large cog.Yeah, the little bolt that holds the plate that goes into the dropout should be in-line with the dropout slot; roughly directly behind the axle nut. This will place the RD more underneath the cogs for better shifting.

I have that bolt on right as there is a hole for it in frame but I am wondering about the big allen nut hole in derailleur itself that can be loosened and moved quite a bit either way.

That bolt DOES NOT go into the rack-eyelet on the dropout. You're missing a D-shaped nut that slides into the dropout slot. That bolt+ D-nut holds the hanger in place when you unbolt the wheel. Here's a picture:

http://www.bikeparts.com/pimage/BPC109497.jpg
http://www.bikeparts.com/pimage/BPC109497.jpg

You can see the outline of the D-shaped nut behind the hanger. Notice that the angle of the slot in the hanger should exactly overlay and match the angle of the slot in the drop-out.

Correct, it's not supposed to go into the eyelet. But then again, if it works, then it works. Aside from looking kludgy, is there any compelling reason why it shouldn't be installed as shown in the pics.

You'll get better shifting performance with the derailleur more forward. Best to have it directly under the lowest part of the cogs. You can see in the last photo that it's about 1/2" rearward of the centreline of the cogs. This moves the upper jockey wheel away from the cogs. You get better shifting performance when the jockey-wheel is closer to the cogs and placing the upper-pulley directly under the cogs gets it as close as possible.

Then you adjust the B-tension bolt to give clearance for the largest cog and that's it. :)

I have that bolt on right as there is a hole for it in frame but I am wondering about the big allen nut hole in derailleur itself that can be loosened and moved quite a bit either way.

No. The spring will return the derailer to same location.