Kent, your second paragraph is wrong. You lower the car and that takes away downward travel. That means the stock shock will tend to bottom out. I know this because it does on my car. With the shorty shock it didn’t bottom, but the tire would rub–driver’s side (I should have bought a narrowed beam). And with the shorty I had less than an inch of “upward” travel in the suspension.
Much of the rest of what you say is right. Your thinking about how to match the length of the shock to the suspension you have is spot on. Bill in Parts (Ascheman) can help you find a shock with the travel characteristics you’re (we’re) looking for. Weak, oil-only shocks tend to work best in our cars, because of the light weight.
But lowering these cars by cutting and welding the torsion tube is not ideal. Why not buy an adjustable beam or–as long as you’re welding–cut the centers out of your beam (one at a time!) and weld in adjusters? (Get both for under $30). Then you’ll be able to set the ride height at will.
And you can also remove leaves to get a better ride, independent of the ride height.
The VW guys who actually race tend not to set the beam with the upper and lower torsion packs working against each other. You might get a ride height that looks cool that way, but the spring rate will be weird, and will tend to progress in a way that is, if not unpredictable, not easily predictable. And not optimal. (I know there are tricks people have tried–disable the lower tube…or the upper..etc. And these tricks have their evangelists. But think about the design of the beam, the intension of the engineers who built it. Or just think about the loads and stresses that had been distributed over four ball joints now being directed mainly at just two of them. I think you’ll see why, in the long run, setting up the beam parallel in the early going is a long-term win.)
There is probably no one “best” way to make these cars acceptable for street driving. But the consensus is that the cut-and-turn method specified by most kit makers is one of the worst.