It does still follow the Y co-ordinate of the Red square I believe, and the reason it is not showing on screen is because the X position is constantly 1256.
Replace 1256 with: 1256 + (Sprite2.X - 364)
Glad to see the white space is okay though, I had worried about that. In that case do you only want white space on the top? Change the condition 1280/2 to 720/2. Or, if you want the white space on all sides change the whole condition to Always.