If you look at the two fuselages together in post #120, (in different stages of completion), you will see it pretty well illustrated. My fuselage is on the right and Kevin's on the left. When you look closely at mine, you will see ONE HALF of the fuse has been shaped, the other hasn't, (the side facing away from the camera). Notice how the fuselage sides stick up above the block just like yours. When you do the sanding, all that "melts" away, and you get a nicely shaped rounded fuselage.

As Bill said, get the nose ring set before sanding by mounting the engine and positioning the ring...then it's just a question of shaping away the excess balsa. That ONE PICTURE of the partially sanded fuselage bottom should be all you need, (along with the pictures of the nose ring position). Notice also how the hatches are rounded to conform to the fuselage shape.

Be careful...go for the obvious extra wood, shaving it off with the electric sander, (or razor plane, but the sander is more fun...ie quicker), until you start to get close to the bulkheads/firewall/spinner nose ring. At this point, slow down a little. DO NOT SAND INTO THE PLYWOOD RING OR BULKHEADS. Hold the fuselage up to a strong light periodically to see if you can see light through it anywhere (which shows thin areas), then carefully "go for it" until you can see how it's going to look. It really is quite gratifying to do this part of the fuselage...all of a sudden the plane starts to LOOK LIKE SOMETHING like a Simla.