Upper pulley too far from cassette
First, take the chain off and shift the derailleur into position and see what happens. If it's still too far away, you can possibly eliminate the short chain (which does look too short) from the equation.

Without the chain, you should be able to see what is causing the derailleur to sit at that position. 

You should be able to find what's preventing the jockey wheel from coming in closer contact with cassette ring by flexing and contracting all the movable parts on the derailleur.

Possibly, the derailleur hanger places it too far out?