I think you just need to get that seat deeper. was the fabric spread knee to knee? also, her knee-bum-knee should make an M shape. The legs shouldn't hang, really

http://babywearerscircle.wordpress.c...g-positioning/

You can see some tips in these videos: (just google on youtube for more!)
(all of these do it slightly differently, so hopefully one will work for you)

http://www.youtube.com/watch?v=laq3dbSFAds
http://www.youtube.com/watch?v=fqtof1v48Nw
http://www.youtube.com/watch?v=5Wsh8v4AHT0