look at the chain and both sprockets from the rear of the bike. Follow the chain line with your eye. the chain should be perfectly straight. If the chian veers to the left or right while making it's way up to the engine sprocket, the chain is out of line.
if this is the case, you can try flipping the rear sprocket around but this depends on which way you have the sprocket on now. one way will move the chain in towards the rear wheel, flipping it the other way will move the chain further away from the rear wheel.
you can take a link out of the chian to shorten it is you can't get it any tighter, but you do not want the chain to be super tight. you meed a little bit of up & down play in the chain.
If you shorten the engine chain you might run into a problem with the pedal chain becoming too loose. this is common and it is difficult to get the pedal chain and the engine chain both tight. this is where 1/2 links come into play, but you have a chain tensioner. you shoudl be able to shorten the engine chain one link and then adjust the tightness with the tensioner. the chain tensioner that comes with the kit is not the best and i have not used one on any of the bikes i've built. getting both chains tight is trial and error, but it can be done with a little patience.
looking at your picture, you seem to have the engine chain way too loose, so i would guess that your chain came off because it's too loose. can you move the rear wheel back to tighten the chain? this is where i'm going to guess that you can't move the rear wheel back anymore because the pedal chain is already tight.
getting both chains tight can and will be frustrating, but it can be done.
you really don't need to put both rubber peices on the inside, one will be fine.
did you get some better bolts, washers, nuts and lockwashers? the ones that come with the kit will break really easy when trying to tighten them.
On one of my bikes, i have the sprocket directly against the spokes on the outside, and one rubber peice on the inside of the spokes. a lot of people have said that doing it this way will cause the spokes to break, but i have been running my bike that way for 2 years, and my spokes are fine. I swapped from a 44 tooth to a 41 tooth rear sprocket this summer, and i had been riding it since august 2008 with the sprocket right against the spokes, when i took the 44 tooth sprocket off, the spokes were fine. I put the 41 tooth back on the exact same way and it's still fine. there are no signs of wear on my spokes at all.