I've seen them installed both ways, long end to the frame and short end to the frame.
It really doesn't matter as long as you point the bend towards the center of the jeep.

If it's still an issue, post a pic of the gap you're talking about.
Could be the wrong bushings- Proper YJ bushings will have a good thick lip on the outside of the frame. I've purchased "yj" bushings online before and gotten everything from bronco bushings to god-knows-what.

 

I have mine with short end to the spring. I'm not 100% which way is up or down. You'll get different answers. The instructions for my lift kit showed them the way I installed them. Others may differ. As stated, the point goes to center. Pretend the shackle is Pac-Man. Mouth forward to eat, whatever.

 

On mine, the short side is toward the frame in the front and toward the spring in the rear. This configuration allows maximum articulation before the spacer contacts the frame to stop the shackle from inverting.

 

Ouadratec website- search on Mountain Off-Road 5/8" Lift Boomerang Shackles for 87-95 Jeep® Wrangler YJ .
Look at installation instructions. Shows a good picture for proper installation (at least for the MORE shackles)