If you aligned the fairing with the square on the left, you'd be aligning the fairing with the floor and, of course, you don't want to do that.
I just finished this with a 7A and on A models, the tire as she sits (or "he," I'm not sure which) is not parallel to the floor. In the 7A instructions, in fact, it notes that you're basically aligning with the tire tread. That's what Van's says, anyway
This is problematic with the wheel pant aft edge because you still have to align it with the parallel centerline of the airplane. For that, I just chose the midpoint of the trailing edge, dropped a plumb bob to the floor and used that line.
I also used an alternative method -- I ran a laser level up the middle of the tire and down the fairing.
The two methods yielded roughly (and by "roughly" I mean within 1/16" of an inch) the same results.
I just wrote about it here.