Can someone tell me how much the drive shaft should move into the trans with the car at ride height? I have 3/8 " now but when you lower the rear down, the shaft bottoms in the trans before the rear drops so the shaft needs to be shortened.

with the rear lowered (closest point to the trans) should have about 1/2"-as the rear moves up, you will gain about 3/8"-1/2"
you need to shorten the d/s