auntverm:
that fabric is supposed to be directly at the bottom-side of the first tray above the dripping tray. Positioned that way, the worms CANNOT fall into the drip tray at all.
Is that fabric larger than the size of the tray? When you put the first tray down into position, the edges of the fabric is supposed to stick out so you can pull it tighter. If the supplied fabric is not large enough, you can use weed cloth.

Yes, that's where it was positioned. It went up the walls at least as far as the bedding, but did not come all the way out of the bin. Should I cut a piece of weedcloth to come all the way out? Will that keep in too much moisture? See, the reason I took it out at all (because it was doing a fairly good job of protecting the worms) is because the bottom tray is so moist right now.

I have extra trays so what I have done with mine, I put the working tray with the weedcloth underneath it into an extra tray and the extra tray (plus the working tray and whatever else are ontop of that) is sitting on 1 ledge of the drip tray. Air is getting to the bottom of the trays from the gap that is created that way.

auntverm,
You should not have excess moisture anywhere. That means that the bin is too wet. I live in a semi dry climate and I have not added water to my bin in quite awhile. I have written this article that I will post at the bottom. Take a look at it. I think that it will help you and it should help to answer all of your questions.
Beth

Here is a link that might be useful: How to Use the Gusanito Worm Farm Bin