Warped bed/carriage and y-axis gap

I checked the two white blocks. The block under the rod can be moved but the white block above is fixed so I'm not able to rise the y-axis.
Or did you just say that I should take the block out and drill a bigger hole?
I just don't want to kill my hardware 

Update: Drilled the hole bigger. Checked everything with a level. My carriage is out of boundary. Everything else is leveled but not my carriage. Is there an alternative to the wood? Can't understand why they use wood for the carriage.

The wood part under the print bed doesn't really matter the main thing is the actual aluminum print bed. The way your pics looked I figured that your guide rods(the ones on the axis with the white blocks) were not perpendicular to the Z axis rods... if this is the case while it will still print ok the actual print will be skewed(not square in the vertical axis). So you need to find an accurate way to square the z rods to the x rods(rods that the print head is on) once this is done then relevel the print bed and you should have nice straight prints.

Well a picture is worth 1000 words right in my case it is probably more

So I threw this sketch together to make sure we're talking about the same things...

The blue is the Z axis rods
The yellow is the X axis rods

The white block give you the ability to change the angle between z and x, as they let you rise or lower the end mount of the x rods.

As for checking them I don't know what kind of squares you have on hand... but any small to medium sized quick square or machinists 1-2-3 blocks can be used or for that matter and square block that is about 2x4x2 inches or bigger but still able to fit inside the printer between the bed and the rods, just move the carriage all the way back and hold the block against the z rod(right) and move it up until it touches the x rod... with some light shining through it you should be able to detect a very small difference and thereby which way to adjust the white blocks.

Hey JJcuff1, Don't worry about it I know how things get when you expect something to work and it doesn't... I work on a lot of machinery big and small and sometimes I wish I had a few pounds of C4 around heh he heh

So, you said you can turn one of the pulleys against the collar??? and even remove it! this is not right they are supposed to be a solid unit pressed and glued together. If they slip it will cause problems like you having in the pictures.

I wonder if the problem could entirely be the Z axis.  The squishing makes it look like there are times it is not moving down when it should.  Plastic gets extruded onto the same layer again, stacking it up high enough for the nozzle to catch on cause skipped steps.  If you step the Z axis down .1 at a time, does it move every time?  Also is Z lift set to 0 in your retraction settings?

Ok Digiprint, The methods I was giving you for squaring were somewhat tricky if you don't have the right tools or haven't done this kind of thing before... So here is a much easier way and should suffice for the accuracy needed for the SD printer, since the case is very rigid and unless it has been bent by falling off a 3 story building or ran over by a car it should be square enough to use to set the x axis you will need a wood dowel or something similar cut to about 9.25 inches(actual length should fit snug between the left side of the carriage rods(yellow) and the floor of the printer)

once you have the dowel so that it fits the left side move it to the right side and adjust the white blocks so it fits the same as the left. While this is not the 'perfect' way to align the axis it will be more than adequate for the design.

I should also mention when adjusting the carriage use the top white block to set the height of the carriage once that is tightened then bring the lower block up so it almost touches.

The belts need to only be tight enough that the teeth won't slip.  The back rod is mounting in bushings rather than roller bearings, and the idler pulleys in front spin freely on bolts rather than mounted on a rod spinning in bearings.  As a result, the more you tighten the belts, the harder it gets for the rod to spin in the bushings and the idlers to spin on their bolts.  That increases backlash and reduces accuracy.

The belts also need to be the same tension on each side.  That was the purpose of the tension gauge I posted to Thingiverse.  You can see if they both deflect the same number of notches on the gauge rather than going by feel or sound when you pluck them.   Loosening the set screws and letting the pulleys spin on the rod a little bit will also let them align so that there are the same number of belt teeth between the pulley and the sliders.