I have a similar problem with my C3 and tohatsu ss 40hp. My transom is 16", the short shaft tohatsu is 17".
I unbolted the transom plate (6 screws) and raised it an inch or so which allowed me to place a 2" spacer on the transom and it is secure and no spray now.
The porpoising is most likely one of three problems:
1. the trim is tilted out away from the transom too far
2. the keel is not properly inflated, allowing the hull to flex too much
3. the floor boards aren't tightening the hull material enough, allowing too much "rocker" in the hull (can be caused by the material stretched of the floor boards worn)
The most common cause of porpoising is the first item.