You could start by taking that line of code out, but I think you’d hit the problem it was originally put in there to address. I’m not entirely sure the code will work for your situation. It’s only ever been tested with a more traditional character model that doesn’t rotate on the X axis.
I’ve put some thought into an alternate approach to doing this, but I haven’t really had a lot of impetus to implement it, since this works well enough for our game. One possibility might be to simply draw lines from screen center to the object, project down to screen, and figure out where it hits the screen edge. That will still give you the problem with objects behind you because there is no screen edge if you draw a line from the screen center to something directly behind you. First thing you probably need to do is figure out where you want to put the indicator for objects that are behind the player.
For human-like characters, dropping the Z puts the icon at the bottom of the screen, which feels right. The top of the screen is used for objects in front of the character, but above their field of vision, while the bottom is used for things behind. That may work for you, so you may need another approach entirely.