This AS-1 Escort kit is a thinner water slide decal but I had the same problem.
It's not explained in the instructions but you have to insert the nose cone, apply the decal then cut it at the nose cone / body tube joint.
Doing it this way allows you to work out some of the wrinkles at the nose cone shoulder.
The nose cone itself takes more work.
With a new razor blade the raised wrinkles at the shoulder lip were slit.
The right inset picture shows the slit area being lifted and then layed over the decal edge underneath.
This will leave some double thickness decal overlays but will look better than the raised folds.