Is your Sanger a flat or runnerbottom?
When you say your plate is set two notches down, do you have up / down pedals too? With the plate unlocked what is it's position to the bottom of the boat? Even or maybe up 1/4"? Also what prop are you running and how far is it from the back of the boat and how far is it to the strut? Before you move the engine up, how far is it to the back of the boat. Was this boat set up with four seats or only two? Check out AZ Don's v-drive page @ http://vdrives.hypermart.net/msgboard/wwwboard.html. Lots of people running Sangers at that page?