Pad Contact Issue

I'm swapping out an old rockshox to a karate monkey fork and having problems with the pad to rotor alignment. Rockshox was PM, KM fork is IS. Shimano brake with 180mm rotor.

I bought this "20mm Disc Brake Caliper Mount Adapter is to PM for Front 180mm Rear 160mm (1 x Bicycle Disc Brake Adapter + 2 x Screws + 2 x Spacers)" which bolts up fine, but if I put in the orientation indicated (arrow up), pad contact is almost zero.

If I flip it around, pad contact (as pictured) is better, but still only ~80% of what is was before.

1. is this acceptable?

2. what kind of adapter would I need to get more contact/bring the caliper inboard?