Ammo makes a big difference. I've seen some guys say Chinese ammo is junk, but my SKS shoots better (about 3 inches) with Chinese than with any other I've tried. Of course, in his efforts to punish China for human rights violations, Clinton put a stop to the importation of Chinese ammo. Which was a very humanitarian thing to do, and also made more room on the boats for Chinese stereos, Chinese TV sets, Chinese rubber dog toys, etc.
Er, anyway... Ammunition. Even Russian ammo just from different plants shoots very differently in my rifle. Some I've tried shoots about 6 inch groups, other stuff won't even stay on the paper. Some Wolf hollowpoint I picked up recently shoots to such a radically different point of impact that ALL the shots missed the paper and I haven't gotten around to determining group size yet. You'd think the Russians would know how to make good ammo if they want to; I suppose barrel vibrations of each individual rifle makes much of the difference.
Ideally, a peep sight should be much closer to your eye than the standard SKS rear sight base. You should be looking through it rather than at it. Though WW2 Japanese rifles had forward-mounted peeps and I guess they worked.
And Matt: We seem to have a great concentration of talent here at AR-15.com, but it's my experience locally that folks who can shoot better than 3 inch groups at 100 yards under practical conditions, especially with iron sights, are few and far between. But practice helps us all.