When they say pinion "nose down", it means in relation to the drive shaft. If the trans is higher than the axle, then the pinion will be "nose down" in relation to the axle, but the trans and pinion should still be parallel (see diagram).
With your car set up with the suspension loaded as you have (on your 4 post lift is ok) use an angle finder to get the angle of the centerline of the output shaft on the trans. Then use the angle finder on the pinion of the rear and match that angle, but make it OPPOSITE on the same plane as in the diagram. Now, if you attach the drive shaft and measure the difference in the angle between the driveshaft and the pinion or trans, it should be 2-3 degrees. Some people say as little as 1 degree and as much as 7 degrees is ok. I believe most u-joints have a max working angle of 3.5 degrees and min of .5 degrees, so I would keep it in that range.
Here's a good tutorial explaining the whole thing. Sometimes I don't explain things very well, but if you follow this, you will be fine.
http://www.hurst-drivelines.com/files/Universal_Joint_Alignment_Proc_111606.pdfAs stated in above posts, there are many theories and one (for drag cars) is to have the pinion 1 or 2 degrees lower than what's described above so that when the pinion climbs the ring gear it will then be lined up properly.
