It is not clear from the picture which cable carrier you have. I recommend this carrier: http://problemsolversbike.com/produc...cable_carrier/ You can move the wire in the carrier to center the pads then clamp the wire. Don't be overly concerned if one pad contacts the rim first, once braking force is applied it won't make any difference. Close is OK.

Set the cable/carrier as low as possible for best leverage. Set the pads as close as you can without them rubbing the rim.

I think that the arm position is of secondary importance, having them level at rest is probably fine.

VERY important: Install a reflector bracket or other means to catch the straddle cable if the main cable breaks; the canti springs will pull the straddle cable down onto the tire, where it will jam the tire and also apply the brake HARD. Rear brake needs one too. Don't ask how I learned this.

Here is a Sheldon Brown article which goes into more detail: http://sheldonbrown.com/canti-trad.html