Okay, the first thing to do is to set the rear sight on '1'. Now go to the 25 yd range, and using the front sight tool, set the point of impact 1" low and on center. You can now return to the 100 yd range where you should be on the paper, or you can stop at the 50 yd range first and make an adjustment if needed. You should be on the bulls eye at 50 yds. This is about as good as it gets. The bottom position on the rear sight is actually exactly the same as the '3' position but is called the 'battle sight' position. It's a 300 yd zero but will deliver torso hits all the way out to 300. I prefer to have the sight on '1' for shooting at the range. The '3' or 'battle sight' setting will throw you quite high at 100, like over a foot. If you wanted to shoot at 200 yds, for example, you would set the rear sight on '2'. This is obviously also going to be high at 100 yds, but only about 6".
Once all that is done, and you're still unhappy with the results, you'll have to consider trying better ammo. 'Golden Tiger' is reasonably accurate and is one of the inexpensive imported steel case brands.