How far behind the desired hood-hold position are you holding the bars? That's probably the ballpark for how much shorter you want your stem to be.
I recently fitted a 20mm shorter and 50mm taller stem to one bike (no, I'm not using all that extra height!) because I was most comfortable holding the bars just behind the hoods. I generally set my handlebars up by getting the saddle/pedal arrangement as close to comfy as I can, then swinging my arms forwards and that's where I want the most-used handlebar position, because I basically want to have only enough weight on the bars to steer.
http://wheel-easy.org.uk/uploads/documents/Bike Set Up 2017a.pdf is a reasonably setup guide IMO.
Yes and no. Plenty of people ride around with saddles well below optimum. Your legs object much less than if you go too high by mistake!
