It's completely normal to put the straps under the epaulettes... in fact I think that's what epaulettes were designed for originally.
Of course if you can get the straps to stay in the right place over the epaulettes, then all well and good and this was done as well.
Add a small pack to your back and your straps are guaranteed to stay in the right place
To fit 37 pattern correctly go through the following steps...
1) take it all apart
2) adjust the belt to fit snugly at belly button level
3) attach the utility pouches to the belt. Check the position is what you wanted by trying it all on.
4) attach the cross straps, they should stick out the bottom of the utility pouches about 1 or 2 inches go over the shoulders and cross at the back and connect to the buckles on the belt. They should be tight enough that they sit neatly and the belt stays in the same position it was originally.
5) fit any other stuff you have onto the strap ends and belt as desired...
British webbing is far and away better than German or US, in my opinion. Just do what Yith has advised. It will take a while, but once you've got it right, it's right for good. Just sounds like you've not got it anywhere near tight enough.
You've got nothing to ein, zwei, drei, vier
Heh, yeah, my preferred US webbing is a belt without any suspenders or doughboy pack, lol 
Also make sure that you have one male and one female cross strap, or two female straps at least.
If you have two males it will not be possible to interlock both straps where they cross one another halfway down your back and the straps will slide off a good deal easier than they normally would.
AGM MP40 - AGM STG44 - CYMA Thompson M1A1 - WE P08 4 inch - Marushin M1 Carbine GBB - AGM Sten MkII
There should be a loop in one of the straps that the other passes through where they cross.
Check out this page... http://www.karkeeweb.com/patterns/1937/ ... traps.html
And 37 pattern fitting instructions: http://www.karkeeweb.com/patterns/1937/ ... nuals.html
As the guys have said it needs to be fitted to be tight.
Small packs are a bit weird in that in the real world the weight of whats in your basic pouches (i.e two fully loaded bren mags, 50 rounds of 303 and possibly a grenade or two) slghtly counterbalances the small packs weight (and again if thats packed with the kit to live in the field for 24 hours and has all the usual gubbins strapped to it - it's a good few KG).
Otherwise your small pack yanks up the basic pouches and your belt... well it does if you it it to the basic pouches by the brass clips.
Seeing as the most your probably going to have in each basic pouch at a skirmish is a few mags of bb, some gas and maybe a grenade you might find a small pack with any weight in it annoying - if it's not got anything in it then it looks stupid on your back anyway.... *most* the time the small pack would be dumped at the FUP or EFL before you even took part in the battle... if you're fighting with it on then it's probably not on your terms
Personally I find the straps under the epaulettes a ballache and most contempory photos I've seen show it over. Given that you'd want to undo and remove your webbing whenever you're not marching or in combat (that would be ovr 80% of the time even in the infantry) you dont want to be faffing around undo buttons on your shoulders every ten minutes. I think it's quite likely the 'official' way of doing it is to us the epaulettes but again the manual tends to go out the window once you're out of a recruit depot or off a parade ground.
That and I doubt thats the reason they were put on BD... epaulettes have been pat of military uniform since the New Model Army, they just go in and out of fashion
But it's whatever you're comfortable with, remember if you were going on a recce or fighting patrol it was not unheard of o leave our webbing behind and just take a couple of 303 bandoliers. If you're not supporting the bren and dont intend to be digging in or be out for more than a few hours it just exra weight you dont need! If you look at quite a few Normandy pics (an especially Arnhem pics) you'lll see guys with no webbing, just a belt and water bottle, a 303 bandolier round the waist or over the shoulder etc. Don't get too bothered about skirmishing in CEMO
"I think we are in rats' alley - Where the dead men lost their bones."