I had a similar engine but less hp on my bullet ski boat. Was a great motor, always a turn key boat and would literally launch out of the water when I hit the foot throttle.
Looks like You have a 25 inch leg, long shaft, but the transom seems to be for a 30 inch or extra long shaft.
Instead of chopping the transom I would suggest getting a transom bracket made up. Google outboard jack plate and you will see lots of adjustable brackets that bolt onto where your engine currently is and then you bolt the engine to that. There are hydraulically adjustable ones from places like Bobs Machine Shop bobsmachine.com which are really good but are very expensive. You could get a fixed one fabricated once you have seen one.
The flat horizontal fin above the propellor is the cavitation plate. That needs to be in a straight line with the bottom of the hull directly in front of it, ie the V part. Having said that, lighter boats with lots of hp are usually higher but you need to experiment. Higher might be an inch or so, not 5 or so like you currently have.
Also if you do a jack plate, the further back you come, the higher you go, but once again only a bit.
Some racers run really high engine heights but you need semi surfacing propellors and a way to get water into the outboard. Too hard for leisure use.
Hope this helps.