Bobson, excellent question.
I would start by remarking that you shouldn't feel as bad as you do about your shooting. Shooting for groups at paper targets is somewhat different from trying to hit 3-D objects one at a time--as in your example of toy soldiers and soda can tabs; the former requires more technique and consistency between shots, while a good shooting instinct, more intuitive sight-placement and one-time concentration will make you do great with the latter.
As a hunter, I'd rather be good at hitting things than at shooting groups--although at one time I took my high-power rifle matches rather seriously. Anyway, here are a few pointers. I will apply them to shooting offhand, but they can be adapted for any kind of position and benching:
1 - Ensure your rifle is in fact accurate; if it shoots all over the place, no amount of technique on your part will make a difference. Ditto for the ammo you use, your sighting equipment, ect.
2 - Build confidence gradually. If you're frustrated with yourself and try to shoot 1 MOA, you'll tense up and produce a vicious cycle of failure and growing frustration. Set yourself realistic goals that get you to leave the range psyched and enthusiastic about your performance--don't forget to have fun.
3 - The key to grouping is as simple as it is difficult to achieve: the minimalism of maximum consistency between shots. This includes not only the sight picture, but how you squeeze the trigger, where your non-trigger hand is, where on your shoulder the rifle rests, at what point in the cycle of your breathing you release the shot, how much of the recoil you absorb before you "stop" the rifle with your body. Be aware of each of these and develop a routine.
4 - As others have said, use your muscles as little as possible and your skeleton (and/or bench) as much as possible. Your shooting stance should be one where the rifle points directly and naturally at the target, without you correcting its direction vertically or horizontally with your muscles. Muscles are big variables and variables are anathema to consistency. A good test is to close your eyes and let the rifle point where it wants to: open them, and if the rifle is off to either side, move your feet--repeat until the rifle points where it should. If an accurate rifle could be magically suspended in the air and pull its own trigger, it would shoot fantastic groups--try to remember that and approach that feel as much as humanly possible.
5 - Keep both your eyes open, and follow up the shots as you would in golf, archery or shotgunning.
6 - As an extension of the previous point, learn to call the shots. At every shot you fire, call where you think it landed, and have a spotter (best) verify that, or at least look through your spotting scope to see if you were right. This is a key skill for accurate shooting, and one that will also ruthlessly eliminate any flinching. And don't "chase the spotter," but try to keep your shots always at the same point of aim.
7 - If you have access to a place where you can have some plinking fun, do it occasionally, so that rifle-shooting does not become an obsession for accuracy--again, keep it fun.
I very much second the idea of the USMC Marksmanship Manual as a great read for anyone wanting to get serious with rifle shooting. Anyway, I hope this helps, and (once more) HAVE FUN!
