Is this fine? Can it be fixed?

 

BTW, I pushed it back on but should I expect it to migrate back?

 

I'm not sure what the problem is? The timing is off, simply take the belt off, time it correctly and put it back together. If the belt is old, or the engine has been sitting (and honestly it looks like both) replace the belt. Make sure it's tensioned correctly.

When installing, start at the crankshaft, then go around the tensioner, waterpump, intake cam and finally exhaust cam. Turn it over a couple of times with a ratchet, then when it's at TDC loosen the tensioner bolt 180° and then turn the engine counter clockwise so 3 teeth go up on the intake cam pulley, tighten the tensioner adjusting bolt and put everything back together.

 

Sorry, ignore the white paint. The timing is fine, the engine has been manually turned over 10 times.

My concern is how the belt is physically slipping off the pulleys and sprockets by almost 4mm, is that okay? The first pic shows it best.

 

Is the crank pulley installed backwards? When I changed the timing belt on my Y8, those gear-like prongs on the pulley were on the outside, closest to the lower cover. A good illustration can be found in step 9:

 

Timing belt has substantial wear on the edges.Its time to replace them. Make sure to install correctly the guide washers (in & out). With the washers in place and the crank pulley pressing into it, belt would not go anywhere.

 

Thanks guys.