12.5" when installed and the car on the ground?Sorry I don't know the answer to that. I would start with 1" of preload and see where it gets you. Most kits are designed to have 0 to 1/2 preload. But there are ways to get where you want to go, just extending the shock out of its performance range won't help.
The rear shock on the s550 kits is a 4.1 shock. 12.5" should be ride height, the shock will only extened to 14.23" (this would be topped out internally) and would damage the shock over time. Just don't go that far.
I'm having clearance issues with mine as well, both boots on my frpp axles are rubbingWe also had the LCA and knuckle removed for bearings and installed BMR toe links, is it possible the alignment was off and caused the clearance to be less?