First thing I can see is that you have 'Keep Vertical' selected in Smooth Look At action.Unless I'm mistaken, this would mean that it looks in the X and Z direction of the target, but ignores the Y axis (so doesn't look up or down).Turn it off.
Second; In your 'create object' State (in 'rebelman : shooting), you have a 'Create Object' Action. The spawn point is seemingly correct (the object you rotate to look at the target) but you have set the rotation to 'range to target'. This is wrong. You should have also set it to the 'Spawn pistol' object, since that's the object which rotated to look at the target.
Just so you understand; what you are currently doing is finding out what the rotation of your target position is, and then matching to it. Not looking at it, instead you are mimicking it. By using the correction above, you are making sure the bullet mimics the direction of your spawn point, which in turn is looking at the target you got from the crosshair raycast.