OK something is wrong (based on the drawn lines in the photo). The cassette should dead stop against the same shoulder as the spacer. A photo of the back of the cassette might help.

At the same time, the correct position for the cassette is with the front sprocket overhanging the outer face of the freehub body by 1-2mm and no more. It has to overhang so the locknut can tighten without bottoming (analogous to the spacer stack with threadless headsets), but more than that can cause the chain to rub the dropout in high.

So the place to start is to base the cassette position of the front overhang, and do what's necessary to achieve that. Then, if necessary research the reason you can't shift to high, most likely a bent hanger.