what is proper drive alignment , towed in or straight ?

I was told to run 1/16" on my 04 38.

straight

With the prop rotation, don't they end up straight at speed with a slight toe in?

this subject has been beaten the death, do a search on it , according to an article from Bob Teague in extreme boat magazine a few years ago, he recommends to set them straight

Here's theTeague article from Powerboat: http://www.powerboatmagazine.com/que...ng-drives.html
He provides some good information on drive toe, and notes that the degree of toe in or out ultimately depends on the particular boat. He does not necessarily recommend setting the drives straight.

Based on Teague's article and my own general boating knowledge, if you're spinning your props in, I would toe the drives in 1/16" to 1/8". I also recommend contacting Fountain, as they will be the best source of information on proper drive toe for your boat.