One hour later...
I take everything I said back. Retro Grouch's suggestion (and Panthers007 ...) was absolutely correct. I started from
the very, very beginning of the process.
Angle Adjustment
The derailleur angle is set by looking down from above. This can be tricky and requires some patience, as the shape of the derailleur cage is often not straight. You’ll want to imagine a centerline in the middle of the cage, which should line up with the center line of your frame. Once the angle is correct, you can completely tighten the positioning clamp.
I noticed that my cage was pulled slightly so I lined up the outer cage to be parellel with the big ring, followed the instructions and it started shifting perfectly.. no cable adjustments needed (handy since my adjuster seems to be kaput...)
I am still confused about where the shifter should be when tightening the cable. Today I moved it to the correct position for the granny ring and that seemed to be correct.
Anyway... thank you everyone.