Sooo... I figured it out and in the unlikely (??) event someone has the same problem, here we go:
The issue was twofold and, as usual with these cameras, down to the slipshod production standards.
- the rangefinder unit was not correctly aligned with the rest of the body.
- the reflective framelines on the viewfinder "eyepiece" lens were not correctly aligned on the lens itself
How to fix both of these issues
- Once I realised the rangefinder unit was sitting ever so slightly crooked I unscrewed the 3 screws holding it in place and jiggled it into what would seem like the correct position, i.e. exactly parallel to the camera body. Doing this it became obvious that the threaded hole for the front left screw was slightly offset, pushing the rangefinder unit out of whack when the screw was tightened. I simply left the screw out – the rangefinder is probably fine with just two screws. If I ever get ambitious I'll carefully drill and thread another whole for correct seating.
- The back lens of the viewfinder is held in place with glue and pops out if carefully lifted with a screwdriver. I wanted the lens to sit farther to the right in its recess and in order to do that, I had to carefully file away at the right-hand round edge of the lens as well as right side the rectangular front bit (the lens consists of a round, convex back lens glued to a rectangular front bit) so that the lens could move toward the right in its recess. I just used a wetted triangular metal file to achive this.
After fiddling with lens and rangefinder unit seating it is probably necessary to reajust the viewfinder optical block so that the rangefinder picture from the prism correctly aligns with the dark constrast patch inside the viewfinder block. I did this by looking at an object at infity and carefully jiggling the block until horizontal alignment is correct. It's probably a good idea to use a spot of glue to keep the block from moving afterwards. Once this is completed the rangefinder can be calibrated in the usual manner.
Anyway, I know this is a potato of a camera but I'll be damned if it's not satisfying to fix them. In hindsight I realised it should have been obvious that the whole rangefinder was facing "away" from the lens path. I have a Yashica Electro and the distance between viewfinder and lens is roughly equivalent to the FED 5. In the Yashica's viewfinder the lens barrel is just visible in the viewfinder picture and after tilting the FED's viewfinder, the lens barrel has also appeared in the viewfinder FOV.