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There's no real solution to this except to pull the pan and either modify it or replace it. The longer steering arm will make your steering heavier. Bending the arm down so far that it is hanging below the vehicle doesn't look like a good idea to me.The 36 box is not as efficient as the 37 up box, so will struggle with the longer arm.
the basic problem is that someone fitted an engine without using the correct pan for the swap. The only way to fix it realistically is to swap the parts or remove the parts and modify them.
While I might be prepared to attempt some kind of in situ mods to the pan, I can't advise you to do that because if it goes wrong when I'm doing it I'm fully prepared to do the work to put it right. If it goes wrong for you I can't help you and you would blame me for giving bad advice.
I've only ever dropped a pan in vehicle once before and it's not a lot of fun.
The only other solution would be to move house.
Mart.