I just put a new chainring on today, and no matter how I positioned the ring on the crank, the inside edges of the ring didn't line up neatly with the crank spider ones. Then it got crookeder when I put on the bolts, and sure enough, I ended up with the same problem you describe, which I'd already had to an even greater degree with a different crank and ring.
25% crank, 25% cheap chainring, 50% lousy job. At least you have someone to blame besides yourself. On the plus side, new chainring for $14.
An inch of slack ain't going to kill you, and neither is 1/8", as long as it's not tight enough to bind. I tried derailing the chain at the loosest point by hand, and I couldn't get it off of more than one tooth at the top. I was previously riding this bike with way more slack in the chain, and I still didn't drop it much with enough slack and wear to pick the chain off of the chainring completely. You're fine, don't worry about it.