Place the guitar on your left leg. This will raise the neck and you'll feel closer to the guitar.
Buy a guitar footstool. Raise your left leg by around 30cm. Click here for my recommendation
The relaxed picking hand stance means that each finger is assigned to the strings. Thumb on top string, index on g, middle on b and ring on the thinnest e string.
With most classical playing you'll rarely see the thumb (on your fretting hand) coming over the top of the neck.