I have never seen them mounted to sit on top of the U-bolts. Did the instructions say to do that? The early ones, like the ones I have, are held in place with the U-bolts, but the bottom brackets sit on the spring. It is a different design than what they have now. I am pretty sure the later ones are mounted to the rear or in front of the U-bolts with the bottom bracket sitting on the spring.
You have a other things going on that don't look right. The top bracket should be parallel to the bottom bracket. Your top bracket looks to be parallel to the bed and not parallel to the bottom bracket. This causes non-uniform strain on the bag and could result in early failure. I think my kit came with a tube that was to be use to get the right distance between the top and bottom brackets and locate so they are parallel and in line with each other. If not I made one to do this. If you want to keep the bottom bracket over the axle, you should definitely cut the U-bolts shorter as advised in previous posts. I think they work better over the axle.
Your install seem a little high. My bags just touch the bottom bracket with about 15 to 20 psi in it. I have a pretty heavy shell so that may be why. The important thing is when the truck is lifted, it does not stretch the bags so much that it damages them.
I first installed bags in 1990 on my 89 STX. When I bought my 2002, I transferred them my new Ranger. I had to modify them to fit the 02, but they are still over the axle and the U-bolts still hold them in place. I have gone to different bags to allow more travel and are smaller in diameter to clear the tires more. Mine are Air Lift too. You can count on having to replace the bags periodically. They start to get a slow leak after a few years. I found a trick to help with that. I put tire 'stop leak' in them when they start leaking and that fixes the leak. It is a little messy when you inflate and deflate them, but that does eventually goes away.
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