As I understand it - and I've been wrong before - the big thing is where the weight is. The reservoir is a pressurized chanber with nitrogen and oil, with a floating piston that separates them. There are also valves to control compression and rebound rates. The shock was designed to have the reservoir end connected to the frame so it isn't subjected to as much vibration which may cause the seal on the piston to leak gas into the oil.
Also, having the shock inverted puts the weight of the reservoir on the unsprung side, and that is not a good thing. The lower the unsprung weight, the better the suspension will operate. Why else would Yamaha use aluminium for the brake shoes rather than cheaper stamped steel? Lower unsprung weight. This is also why inverted forks typically perform better than conventional forks. Less unsprung weight allows the wheel to react to changes in the road surface faster. Only sprung weight can be controlled by the suspension.
With regard to the welds, it looks like you need to increase the heat, lower the wire speed, or both. If the wire is touching the surface as you are welding, you will feel the gun push back, reduce the wire speed or increase the heat. The opposite also applies. The arc should carry the metal to the weld once established.
It appears like the welds are on the surface rather than penetrating the metal. Hit them with a small hammer and see if they break off. MIG welding should hiss and produce minimal splatter, not crackle and splatter everywhere. Even with flux core wire. Also check your welders polarity to make sure that the wire is negative and the clamp is positive when using flux core wire.
