I think it's great that you keep your head up. I'm not as good with that and sometimes I get surprised, even almost missing a turn in point here and there in crits. No excuses for me, so it's good not to see that in someone else's riding.

The picture is a good illustration of the potential of riding closer to the side of another rider. If you can park yourself on their quarter, like 7 o'clock or 5 o'clock, and just copy what they're doing, you'll probably be in good shape. In the picture you're a distant 4 o'clock. If you could have planted your front wheel where that "<" shaped line is on the pavement, pointing to the rider's rear wheel (under the "ME" of the watermark), you'd be about 1-2' to the right and just behind the rider in red. To do this it might help to look down just before you enter a corner, to see who is to your 4/8 o'clock, i.e. just behind but to the side of you. If there's no one there you should move in a bit. If you're already on someone's 5/7 o'clock then just stay there, 1-2' to the side, 1-3' back.

I seem to choose the outside line nowadays but before I'd want to be to the inside. I think both have their merits. In high speed corners the outside collects the crashes so that's the reason for staying inside. On the other hand I seem to be able to find myself inside of the stuff as it slides out (it helps that I'll back off a bit if something doesn't seem right) so being more outside isn't really a problem for me.