I know it's difficult but, you need to slow down a bit & wait for us to respond to your questions. Unless it's a bad camera angle illusion, now you're too far forward; you only need max 1" of clearance.
I can't tell from the pics whether you cut the tubing off the bearing mounts but, you should; being open at the ends makes the tube weak & susceptable to collapsing/bending.
Yes, it's ok to sand the axle, it's also a good idea to check &, if necessary, run a smooth file over the bore of the sprocket, brake & wheel hubs to remove any possible burrs that may have formed.