With the supplied protractor sheet, you should just be able to drop the stylus tip into/onto the designated spot, and then use the outside case of the cartridge to make sure that the cartridge is aligned squarely to the reference lines of the protractor.
I'm not sure what cartridge it has, so i can only generically reply to your questions. I've only run one Rega deck, the P3-24. Its arm came with a three hole design in its headshell. I also had the Rega Elys2 cartridge on that arm. The Elys2 cartridge had a three hole design that directly corresponds to / was designed for that arm. So, you'd mount the three screws, and supposedly you were in perfect alignment.
THe P3-24 was a more advanced level of deck, and they made it foolproof. I'm a little surprised that their entry level deck doesn't have the same foolproof way of mounting the cartridge, given that the typical use for it was going to be with people that were not used to setting up turntables.
So, back to the protractor:
I've always taken a pin, and punched a slight relief at the stylus drop point on the protractor. This should give you the required overhang. Then by eye, make sure that the casing of the cartridge is aligned squarely to the reference lines of the protractor. You'll never get it 100% perfect with a pivoting arm, but you can average out the alignment between the inner and outer "null points" easily enough, and accurately enough, for fine playback.
What the klunking noise is, I'm not sure.
Did you buy the deck new?
My first thought is spindle bearing noise, or maybe motor noise.
If you pull the belt off, does the platter spin freely and smoothly?
Is there any flat spot in the belt?
Another good source for TT information is
http://www.audiokarma.org/forums/index.php (AK)
There are quite a few people with that deck there, and a whole bunch of knowledgeable TT veterans.
You can ask there, or do database searches as well, if you don't want to sign up. I like this site, as its not as contentious as some sites that deal with analog TT playback. AK and LH are two really friendly sites to ask questions or seek answers.
Does the needle drop easily onto the record, or does it try to skate inward?