If the air/water line is visible and below the collar beneath the cup flange then leave it where it is. Don't worry that you didn't see results over night. Your issue most likely is you are setting it to push foam into the collection cup before it has broken in. When it starts breaking in is when you see this burst of foam into your cup and since it is set too high, it knocks down the foam head and the process starts over again.
A skimmer will develope a transparent slime coat within the body that is unique to its water level setting. If you had it set high before, then it needs time to adjust for the new lower internal water level. Resist the urge to keep tweaking it. Leave it set low (where it's at) and wait for a good foam head to form and STAY formed. If/when your foam head begins to develope and remains consistent for a day or so, then I would start making adjustments. The adjustments should be made SLOWLY and in small monitored increments. After each small adjustment you should have a monitoring period of maybe an hour or so to see if the adjustment was sufficient. If you dont wait long enough and tweak it again before things have settled in, then you will be running in circles. Skimmers are all about patience.
I run my sump level about a quarter inch higher than what yours is in the pic. My level is just over the flange. Yours looks to be right at the flange so you may or may not want to raise the sump level a little higher once you give it some time to settle in at your current mark. If you end up running the sump water level above the flange then most likely you will need to use the oring and Teflon tape for the silencer.
I strongly suggest getting an ato and ditching that box it's in. You will thank us later.
Boy, I've never been in a hobby that required so much patience before! Thanks for your advice, and I'll go ahead and proceed slow. Can I clean the collection cup (you see how nasty it is) or will it become just as dirty as I tune in the skimmer?