You use a jar lifter, and have a jar rack in your boiling water canner. This rack keeps your jars from hitting the bottom or sides and overheating and breaking.
Yes, you put the lids on, and lightly tighten the screw bands, never tight.
The reason is: They will be taken off in about 24 hours after the lids have all sealed anyhow.
Put your peppers, covered with the hot vinegar and with the lids on, into the canner, wait for the water to return to boiling, and then, begin your processing count. You do want the boiling water to be about an inch over your jars.
When you remove the jars, at the end of the time, set them on a towel on your counter. If there are any major drafts, lightly cover them with a towel.
As the jars cool you will hear pop, pop, pop, this is the jars sealing.
The next day, or 3-4 hours later, go through them and look at the lids, the centers should be concave, and now you can remove the bands.
You can also take a spoon, and lightly rap on the lids, a high pitched bell like sound is good, a deep thud, and you may not have a seal.
If not sealed, put into the fridge and use it up, check the jar edge for chips, or food trapped under the seal that could have caused it not to seal. You need to know why that jar didn't seal, so you don't repeat the problem.
Be careful adding non-acid foods, you need alot of vinegar to keep the home canned foods pickled and therefore safe to eat.
If you are going to decrease the vinegar, you will need to pressure can all low acid foods.
Jams and Jellies are normally made with fruits, which are acid foods, so they are also safe to water bath can.