To add to what Alphaghost has post, have you tried to test what kind of group the rifle will shoot to begin with (read a larger target if needed).  The real point here is to test if the rifle will group to begin with (don’t touch the sights, just get a group down somewhere on the paper to confirm that it will print).  If the rifle is spaying at short ranges, then bullet strikes off the FS, burs/ a dent in the muzzle may be the problem.


Now if the rifle will print groups (not shotgun patterns) lets move on to the sights.
Start by confirming that the rear sight is dialed all the way down (don't look at the numbers).  Now click the elevation dial up two clicks.  If the dial is not set at 3 at two clicks up off bottom, then you need to reset the dial.  This is done by setting the dial to 3, then loosing the allen set screw (#14 in the below link) in the small hole just in front of the aperture, you take the rear sight housing all the way down (use the bottom section of the dial), back up two clicks, then retighten the allen setscrew.

www.ar15.com/content/guides/parts/upperreceiver.html

On to the two apertures,  
The large one is a battle aperture and used for the shorter ranges.  When you go to the smaller one, it raises the shot (sights looking more downward), and is use for the higher number on the dial.

Now that you have the rear sight set correctly, are using the correct aperture/number on the dial, its time to get after it.  If the rifle is shooting high, then the front sight post goes up (don’t touch the windage dial). The rifle/barrel is going to shoot where it does, it’s the sights that you are adjusting to meet the bullet POI.  Now having said that, if you find that you have unscrewed the front post to the point that it's bottom ring has cleared the top of the FSB, then you will need to install a longer sight post.  Bushmaster sells the higher (.040) Posts for under $10.