I drew a line where the guitar is in comparison to the middle of my face. Any opinions on what is best??? Does it matter or just a personal preference ?
First of all - beautiful guitar.
Regarding your question: I don’t think that it matters… I never cared too much and it worked fine for me.
I think on picture 1 your strumming hand seems to be in a very uncomfortable position, as in very at the back and your forearm seems very parallel to strings which is not something I do personally. Picture 2 looks a lot more natural to me.
Consider that classical guitarists put the waist of the instrument completely on the other leg. IMHO, do what’s most comfortable to you.
I think a lot comes down to personal preference and what feels comfortable. We all have different body shapes, arm length and indeed different sized guitars.
Looking at your pics it’s more your guitar to shoulder angle I’d look at. You look a bit twisted round. Have you tried having your guitar, shoulders, pelvis and knees more parallel and facing forwards?
Perhaps also raise the guitar neck a little more above the horizontal.