you've got it, springs on full compression (bumpstops type compression) and the pulley can/will hit the axle case just beside the diff housing
all i can really see in your picture is the upper portion of it, waterpump etc'
cast iron pulley will chip and crack, the pressed steel pulley buckles, the impact eventually starts moving the pulley and scrapping the keyway in the crank and the timing belt gear, once it's been hit often enough it undoes the crank bolt enough to let everything chatter at it's own pleasure
i reduce the risk by first putting thick washers above and below the engine mounting rubbers, i use the washers from the top of the shock absorbers as two of them give me a 1/4" or so lift at the front of the engine, this will not necessarily stop the pulley hitting (my 109 still does but only just)
the cast iron pulley can be machined on a lathe to remove the rear Vee completely and a small amount (2-3mm) can be taken off the front Vee
i have heard recently that the Cortina Mk3 or 4 engine mounts are approximately 10mm taller than Series mounts and fit straight in, this hopefully would reduce the risk of contact even better
i haven't fitted extended bumpstops to stop it happening as i like to keep maximum articulation, i've parabolics on my 88" and standard leaf packs on my 109, the 109 has a pressed steel pulley and the 88" has the cast pulley, both have struck the axle when laning/offroad even with my washers lifting the engine but as i've said it reduces the impact and over the last few years i've not developed any crank damage
i do have a crank sat on my table that i'd guess was damaged initially by impact shocks (came out of a scrap engine that had been heavily abused and offroaded), it looks really rough around the keyway but isn't quite scrap, combine that with a new timing pulley and woodruff key and it will be re-useable