Ted: I second ALB's advice. But I modify: If the screws were loose already, first pull the arms off and see if they were on straight. I put one on whacked 30 degrees out when I pulled springs out of my car. Almost didn't notice, but the grub screw wouldn't seat.
So you might have just loose arms. Or you might (unlikely, but maybe) have trailing arms that are on wrong. Or you might have dropped spindles with beam adjusters that are designed to drop it further--a common error, I'm betting.
What you will want are either
1. 2 inch drop spindles and a beam set to stock height, or
2. Stock spindles with a beam set to be lowerable about two inches.
Now a word on the torsion springs:
The VW comes with (as pictured) four "big" leaves and six smaller ones stacked in each tube in the beam. These were designed to be removable to adjust the spring rate, depending on the amount of weight riding over them. The Beetle is a bit on the heavy side, being made out of steel. Your car (and mine too, I know this cuz I did it) might just be about 200 pounds lighter over the front wheels than a stock Bug was/is.
For this reason, taking out some or all of the small leaves might give you a better ride.
You don't want to do it if the car is too low already, as less springs will take it down further. But the ride on my car was dangerously stiff before I pulled all six small leaves out of both tubes. With just the four big ones, it is right.
So look hard at what you have. If you have drop spindles and the kind of beam that only allows you to lower the car, you should still be able to adjust it to "stock" height at the beam, which would leave you about two inches lower than stock in front. And that is just about perfect for these cars.
Personally I prefer the stock spindle and the lowering adjuster, with fewer leaves. That setup works on my car.
Oh, and: fixing an exhaust leak is usually a matter of gaskets and washers and tightening nuts. I mentioned the carb heat tube because I had that problem too--the engine has maybe 250,000 miles on it, and this sort of thing happens. Fixed it with tape, temporarily. Pulled the engine in favor of a Subaru, but the right fix is to just replace that one part. Cheap and easy.