You want to line up the 2.5" lines (BLUE SOLID LINE) with the upper right quadrant of the pinwheel block, as well as the diagonal (BLUE DOTTED LINE).
Make sure that you have enough "block" left on the other side of the RED LINE (5" border).
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If all is okay, trim the right and top edges of the block without moving the ruler or the block.
Turn the block so that the two trimmed sides are now at the bottom and left on the mat.
Place the ruler so they line up with the 5" lines (RED) at the bottom and left, with the untrimmed edges at the right and top.
Line up the center and diagonal again in the upper right hand corner.
Trim the right and upper edges.
And you should have a perfectly sized Pinwheel block.
In theory anyway.
Oh, one last note.
If you're using a ruler that has the added 1/2" measurement, like the one in the picture (GREEN circle), ALWAYS make sure it is on the bottom left, away from where you're measuring and cutting.