eroc. its hard to tell in the first pic if that is the front or backside of the flare. the 2nd pic is the correct way. i did a write up on this awhile back i'll see if i can find it. use 3m plastic & emblem adhesive, it works great. i also got fancy & put a staple in the end of mine to resemble the factory. i used a t50 staple gun staple & heated it up holding it with pliers & carefully pushed it through the welting & plastic of the flare.... helps hold it & looks almost like factory.
here's the link, it's more about the best way to prep & paint the welting but has a great, little known idea from jason d who used to be over at tac. sorry no pics, i'll try & get some of my installed welting, but again your # 2 pic is the correct way.
http://www.78ta.com/smf/index.php?topic=14556.0another trick i found to close the gap is to install the welting angled in towards the body as much as possible to get ahead of the game & then, if needed, while test fitting the flare, CAREFULLY use a heat gun on the welting & push it in towards the body even more. & as a last attempt if there is still a gap it's probably because you flares are warped or crappy aftermarkets & will need manipulation with the heat gun to actually form the flare to the body better. have a wet rag to cool it down right away & to hold the hot flare in position against the body. i had to do that on one of mine & it worked great. but be carefull, there is a fine line between slightly molding it & MELTING it!!!
hope that helps some.