I wouldn't worry overly much about your grip--use whatever is most comfortable for you, points relatively naturally, keeps your fingers away from accidental contact with the controls, and allows you to retain your weapon well enough (personally, I also require that my strong hand grips the gun exactly as if I were going to shoot one-handed, which is a distinct possibility in certain situations).
Pulling your shots to the upper-right could very well indicate flinching, alright. One thing that could help (it helped me, anyway) is to force yourself to stop blinking in anticipation of a shot, if that is something you do, so that you can see yourself flinching--then try to stop flinching by focusing mentally on the sight picture so intensely that you're not even thinking about the shot, which should ideally surprise you. Using snap caps is a common and effective way to help you better see what you're doing--mix a couple randomly in the magazine (get somebody else to do this if it would help, but if you're not thinking about each shot, then it shouldn't matter much), and when the shot doesn't happen, it should be easy to see whether and how badly you're flinching (don't blink!). It is this visual feedback that intuitively helps guide your practice. Also practice dry-firing to reinforce in your mind and gut how it should feel to shoot for real, as if there were no shot forthcoming.
Aside from flinching, there may still be consistency issues with your trigger pull or some unsteadiness in holding the gun, given the width of your groups (I say this because when I've flinched I still got fairly tight groups, just way off target
). I'm not saying that you're doing badly, mind you, because your shots would still be on the target at common combat ranges, but let's see if we can help you do better (and I think that you can). If you really want to see what you're doing clearly, a laser can be a great training aid in this regard. A "real" one designed for combat would be ideal because you could shoot with it without breaking it, but if you don't want to pay the hefty price (I haven't yet but if I do someday it would be because I've chosen to use it in combat), then any cheap laser (e.g. designed for Airsoft guns, like I one I train with) will do for dry-firing.