I believe your #1 photo is the correct position for the bushings. It will allow the cross to move around, but the two yokes should be positioned by the bushings in the transmission and torque tube. If they were installed in the #2 position, there's a possibility of the cross hitting the ends of the bushings (the ends with the taper.)

Generally when a u-joint is disassembled, it should be put back together in the same position it was originally. In other words, the same trunnion bushing on the same yoke ear and on the same end of the cross. But if it was previously assembled incorrectly then all bets are off.

I'm not understanding when you mention slots on the trunnions. If you mean the faces where the bolts go thru, the trunnion bushings should fit into the recesses of the front yoke. If they were backward, there would be a gap between the bushing and the cutout in the front yoke. I believe the mating surface should be lined up with the center of the bushings.

Kevin
1951 Chevy 3100 work truck
Follow this saga in Project Journal
Photos
1929 Ford pickup restored from the ground up. | 1929 Ford Special Coupe (First car)
Busting rust since the mid-60's
If you're smart enough to take it apart, you darn well better be smart enough to put it back together.