It is important that both shocks be adjusted to the same height. You loosen the (rear one) lock nut, then count the flats that you turn the front one and turn the other shock an identical amount.
You'll notice the rear fender rise or fall, whichever direction you choose. The higher you go the more shock travel you'll have. Many riders prefer to keep the fender 1-2 to 3/4" from the tire, like a Ridgeback, but it isn't usual to see an inch or inch and a half of fender travel between the fender and tire. The lower position of course lowers the bike slightly. I thought my K9 cornered a bit better at a lower setting, but the ride was stiffer.